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October 06, 2012
Growth of Sustainable Investment in Europe Continues to Outpace the Overall Market
    by Robert Kropp

In its fifth biennial survey of sustainable investment in Europe, Eurosif identifies norms-based screening as the fastest-growing strategy, and urges improved communications to encourage greater uptake of sustainable investment by retail investors.

Every two years for the past decade, Eurosif—the European Sustainable Investment Forum—has published a study of sustainable and responsible investment practices in Europe. This week, the fifth report in the series was issued.

Acknowledging the fact that sustainable investment encompasses different meanings for different investors, Eurosif divided this year's study into seven investment strategies: sustainability-themed, best-in-class, norms-based screening, exclusions, ESG integration, engagement and voting, and impact investing. This year's report marks the first time that impact investing has been studied separately, and given its own section.

Overall, the study "shows that all responsible investment strategies surveyed have outgrown the market, and four out of six have grown by more than 35% per annum since 2009." The report identifies norms-based screening, a strategy that "involves the screening of investments based on international norms or combinations of norms covering ESG factors," as the fastest-growing form of sustainable investment, having more than doubled to over $3 trillion since the previous report.

Norms-based screening was followed by exclusions and best-in-class as the fastest-growing strategies. As US SIF: The Forum for Sustainable and Responsible Investment found in its 2010 Trends Report on sustainable investment in the US, the largest number of sustainable investment dollars in Europe remain invested in exclusions, which typically exclude investment in such industry sectors as tobacco, alcohol, gambling, and weapons.

In fact, the report found, almost half the total assets under management in Europe now exclude certain types of weapons such as cluster munitions and anti-personnel mines. Both weapons systems are governed by international conventions, a fact which underscores the importance of legislative drivers in encouraging further uptake of sustainable investment practices. "Continued and increasing focus on investors by national and EU legislators," the report states, "is the likely cause of this as legislators make moves to safeguard Europe from future financial turbulence caused by short-sighted behavior."

The most important driver for the increased uptake of sustainable investment remains its adoption by institutional investors; and, even as total sustainable assets under management in Europe now exceed $15 trillion, Eurosif argues that there remains much room for further uptake of the practice. Despite the positive findings of the report, "The figures also mask some uncomfortable truths," Eurosif states. "The European SRI market remains primarily institutional."

"Why are retail sales not keeping pace?" the report continued. "Clearly communication and clarification is needed to make retail investors see the same value in SRI that professional investors do."

The report "supports our conviction that SRI has the potential to bring some answers to the growing concern by society and policy-makers about reconciling finance with long-term, sustainable growth," according to Francois Passant, the Executive Director of Eurosif.


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