Robust growth for sustainably managed assets in German-speaking countries

Demand from pension funds and insurers in Germany is weakening, however, says FNG.

Sustainably managed assets in Germany, Switzerland and Austria showed double-digit growth again last year, according to FNG, the sustainable investment forum (SIF) for the three countries. In its latest market report, FNG said the volume of sustainably managed assets rose 17.8% to €71.4bn in 2012. In the year before, the volume was up 16.7%. Breaking down the €71.4bn figure, the report said €40bn was managed in Switzerland at the end of 2012, €26bn in Germany and €5.1bn in Austria. Roughly half of the total volume (€34.2bn) was managed in sustainable investment funds and another half (€36.4bn) primarily in mandates from institutional investors. The remaining €800m is managed in structured products in Switzerland. For responsibly managed assets, which FNG classes as those where companies are excluded on ethical grounds, it put the asset volume much higher at €1.43trn. Companies that German-speaking investors typically shunned were manufacturers of cluster bombs and anti-personnel mines. The second most common exclusions in Germany were foodstuff companies, and in Austria and Switzerland, makers of biological and chemical weapons, according to FNG. In Germany, the FNG report said that institutional investors owned 77% of the sustainable assets in 2012, up from 68% in 2011.But the increase was driven mostly by growing business within high net worth asset managers. Interestingly, the share of sustainable assets owned by ecumenical organisations, pension funds and insurers, shrank. For ecumenical groups assets declined from 49% to 30%, and for pension funds and insurers from 27% to 10%. Asked about the decline, FNG chief executive Volker Weber said pension funds and insurers remained sceptical about sustainable investing: “Although there is a great deal of evidence to the contrary, many of these institutions still believe that sustainable investing means a sacrifice of return or a much smaller investment horizon.” He said scepticism will remain until there is a “generational change” at German pension funds and insurers: “We also would prefer to see more engagement from unions, known for their socially-mindedness. So far though only MetallRente has done anything for the sake of responsible investing.” MetallRente, the €3bn union-backed scheme became a signatory of the UN-backed Principles for Responsible Investment last July. Weber said sustainable investing would get a further boost if policymakers in Berlin designated it as a separate asset class, much like hedge funds or real estate: “We are working with them on that.”

Link to FNG market report