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December 14, 2006
Institutional Investors in France Foresee Continuing Growth of Socially Responsible Investing
    by Bill Baue

A Novethic survey tells some of the story behind the numbers documented in the September 2006 Eurosif report on the growth of SRI in Europe.


The fifth annual survey of socially responsible investing (SRI) in France by SRI consultant Novethic points toward a continuation of the growth documented in a report on European SRI markets issued by the European Social Investment Forum (Eurosif) three months ago. The Eurosif report found the French core SRI market--employing strategies such as ethical exclusions and positive screening--at €8.2 billion at the end of 2005, up 162 percent since the last Eurosif market study in 2003. The broad SRI market--using strategies such as simple exclusions such as tobacco, engagement, and integration of environmental, social, and governance (ESG) considerations--grew 663 percent, to €13.8 billion.

Novethic, a subsidiary of Caisse des Dépôts et Consignations (CDC--a public financial institution that safeguards and invests private deposits), surveyed a slice of the French market-- 50 institutional investors. Of their €400 billion in combined assets, more than €50 million is committed to SRI strategies. Just under half (48 percent) of the institutions have made SR investments. Of those, 71 percent intend to commit more to SRI in the next three years. More than half (54 percent) of those who have not yet committed to SRI intend to do so in that timeframe.

"The year 2006 is turning out to be a pivotal one, with some large institutional investors getting involved in SRI for the first time," stated the survey, citing Fonds de Réserve pour les Retraites (FRR) and Etablissement Retraite Additionnnelle de la Fonction Publique (ERAFP). "[A]nd SRI investments should reach a record level in 2007."

This affirms the Eurosif report (to which Novethic contributed), which obliquely referred to the French Parliament's enactment of the "new economic regulations" (nouvelles régulations économiques, or NRE). These laws required all French corporations to report on the sustainability of their social and environmental performance, which acted as a boon to SRI in addition to other more recent dynamics.

"With no dramatic legal changes since 2003, the growth of assets can be partly explained by the increasing number of mainstream institutional investors on the French market," the Eurosif report stated. "This has spurred the interest of more and more fund managers."

The fund managers held in high regard for their SRI capabilities include Dexia Asset Management (by 56 percent of the institutional investors surveyed), Sarasin Expertise Asset Management (38 percent), and Integral Development Asset Management (IDEAM--30 percent.) BNP Paribas Asset Management, which co-sponsored the survey along with Novethic and investment consultant Amadeis, came in fifth with 18 percent of institutions regarding it most highly.

"Best in class" screening is the most common SRI strategy amongst those surveyed, employed by 70 percent of the institutional investors. Next comes exclusionary screens based on negative practices (40 percent), and then integration of ESG considerations into traditional investment practices (24 percent.) The respondents foresee the mainstreaming of SRI strategies.

"Nearly half of those surveyed think that within a time horizon of five to ten years, SRI criteria will be used for all institutional investment decisions," stated the survey. "Over time, investors are less likely to view SRI as an experimental approach."

"This expectation is strongest for those that have already begun to invest in accordance with SRI criteria (68 percent)," it continued.

Almost half (46 percent) of respondents are satisfied (and a mere eight percent dissatisfied) with SRI's returns--both in the financial and the so-called "extra-financial" realm.

 

 
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