The market for responsible investment in Europe, including company exclusions, investor engagement and the integration of environmental, social and governance (ESG) risks into traditional financial analysis, is valued at €2.7 trillion ($3.8 trillion), or 17.5% of the European funds industry, according to the bi-annual market survey produced by Eurosif, the lobby group for the European SRI industry, released today (October 1). Eurosif said responsibly managed assets had grown by 102% between December 31 2007, when it’s latest survey ended, and December 31, 2005 when it last carried out the survey – a compound annual growth rate of 42%. The survey of asset managers and asset owners, said the growth was due to greater acceptance by investors that responsible investment is part of good risk management, particularly concerning climate change and company valuations. It said ESG considerations were also increasingly being applied to traditional financial services products, partly because of growing pressure from non-governmental organisations and the media. Eurosif breaks down the SRI market into two parts. The first is’core SRI’, which consists of ethical exclusions and different types of positive screening funds such as best-in-class and themed investment strategies. It estimates that this market has grown to €512bn in Europe. Its second ‘broad SRI’ category includes more policy-oriented concerns such as company exclusions, engagement, and integration of ESG risks into traditional financial analysis. It values this at €2.2 trillion, giving the combined €2.7 trillion figure. Eurosif said Germany, France and Switzerland had recorded the fastest growth in core SRI strategies, while the UK and Netherlands remained the largest markets.
For the broad segment, it said the Netherlands had experienced the fastest growth followed by France. The UK remains the largest broad SRI market. It said discretionary mandates were the most popular SRI investment vehicles. Equities are still the preferred SRI asset class, but fixed income and alternative asset classes now cumulatively represent half of the total for SRI allocations. Matt Christensen, executive director at Eurosif said: “In spite, and because of, the ongoing
financial market turmoil, environmental, social and governance issues are becoming more relevant as important criteria for investors. SRI is growing dramatically and becoming more refined as an overallapproach that meets the diverse interests of European investors. In the past two years, we also see the emergence of SRI thematic funds and a greater focus on areas such as property, private equity and microfinance.”
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