German institutional investors are the European laggards in adopting responsible investment approaches, although there are signs of potential growth, according to a comparative study of institutional markets.
The report by Axel Hesse, consultant for Germany-based SD-M, Sustainable Development Management, in conjunction with Swisscanto, the Swiss fund manager, found that German investors had some way to “catch up” on knowledge levels about responsible investment shown in other European countries.
The new report did not detect any major change from a 2005 report, which found that only one out of 20 German pension funds said they had a “very good” understanding of sustainable investments and six were “rather poorly” informed. However, the report said 65% of German investors now believe the return potential of sustainable investments is similar to that of conventional investments. The lack of SRI take up so far by German investors comes despite the integration of sustainability reporting for pension funds in the 2005 Act on the Supervision of Insurance Companies.
Nonetheless, the report said there were notable Germanexceptions that have adopted SRI investment criteria. These include the €260m Gothaer Pension fund, The €134m Gerling pension fund, the €49m Hannoversich pension fund, the Hamburg Mannheimer pension fund, Victoria Pension fund and Metallrente, the pension fund for the German metal industry. A separate report by Fortis Investments of German
retail investors found that 81% said they now thought that sustainability was a major political theme, but that only two per cent invested in sustainability related investment funds. More encouragingly, 20% said they were likely to consider the issue in the future selection of funds.
By comparison, the SD-M report found that in Germany’s neighbours Switzerland and Austria the SRI market is growing rapidly. In its 2005 and 2006 studies of the Swiss institutional market, Swisscanto found that the share of sustainable investments in pension funds amounted to more than CHF5bn, or 8.6%, with funds saying they envisaged a target level of 30% in SRI investments. However, there is no SRI reporting obligation in Switzerland, apart from criteria for
declaring corporate voting.
In Austria, seven of the country’s nine employee pension funds (MVKs) introduced under the 2002 company act into which each employer must pay 1.53% of an employee’s monthly income, say their investments are oriented towards sustainable criteria. Four have undergone a sustainability certification: Bawag Allianz, Bonus MVK, BUAK and VBV.MVK’s manage more than €700m in assets. Another major SRI investor, the VBV Pensionskasse with assets of €4bn, has established Vinis, its own company for integrated screening, best in class investment and engagement with the goal of extending coverage to all assets. The SD-M report examines the development of SRI in a number of key global institutional markets. Click here to download report