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October 14, 2010
Eurosif Publishes Results of Survey on Sustainable Investment in Europe
    by Robert Kropp

The survey finds that bonds have replaced equity as the favored asset class for sustainable investors, and overall sustainable assets under management have reached almost $7 trillion.


Sustainable investment in Europe has nearly doubled in the last two years, reaching almost $7 trillion by the end of 2009, according to the results of the most recent in a series of surveys published this week by Eurosif. The previous survey was conducted in 2008.

According to Eurosif, "The financial crisis has created an opportunity for SRI (Sustainable and Responsible Investment) to play a helpful role in the development of the financial markets of tomorrow." As the survey observed, "Respondents said that the financial crisis has made them more aware of the need to integrate ESG (environmental, social, and governance) risks; from a demand perspective, the increase for more transparent products has correlated well with the SRI philosophy."

As was made clear by the BP oil spill in the Gulf of Mexico, environmental and social crises have also contributed to increased interest in sustainable investment.

The survey, which was expanded this year to include sustainable investment activity in Poland, Greece, Cyprus, Estonia, Latvia, and Lithuania, found that 66% of sustainable assets under management were held by institutional investors, although the number of individual investors has increased in almost all of the countries included. "A vast majority of SRI investors predict that demand from institutional investors will be the main driver for SRI growth in the next three years," the survey observed.

In terms of asset classes, the survey found that while both mainstream and sustainable equity funds experienced negative growth between 2007 and 2009, the decrease in sustainable equity funds was substantially less. In the 2010 survey, bonds became the favored asset class of sustainable investors, comprising 53% of the total, which represents a 33% growth over the total found by the previous survey. The monetary asset classes also experienced substantial growth, increasing by 114%.

According to Eurosif, "The reader should be cautious in the interpretation of this spectacular growth," because "it is not known to what degree some of this growth is due to the transfer of assets from existing funds, versus the accumulation of new assets."

Eurosif differentiated between two types of sustainable investment in this and its earlier surveys. Core SRI is defined as an investment strategy consisting of at least three negative screens, as well as positive, or best-in-class, screens. Broad SRI consists of one or two negative screens, the practice of shareowner engagement, and the integration of ESG considerations into investment decision-making. Practitioners of Broad SRI are predominately institutional investors, according to Eurosif.

The survey estimated that "total Core SRI assets represent ten percent of the asset management industry in Europe," led by the Netherlands, where "Core SRI has the largest market share of the domestic asset management industry." Broad SRI assets captured almost 40% of the overall market.

Looking ahead, Eurosif expects that future growth in sustainable investment will come from several sources. As noted above, one is the increased interest of institutional investors, evident both in the percentage of assets under management held by them and in the marked increase in signatories to the United Nations'
Principles for Responsible Investment (PRI). However, the increase in the number of individual investors is expected to continue as well.

Other factors include increased interest from high net worth individuals, the role of the media in publicizing ESG risks and opportunities, regulatory activity addressing sustainable investment by pension funds and transparency by individual investors, the emergence of voluntary initiatives.

 

 
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