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Green private banking boom behind 67% annual rise in Swiss sustainable assets

High net worth and retail investors overtake institutions in allocations to SRI themed funds.

A surge in the levels of private banking and retail investment has boosted sustainable investment strategies in Switzerland by 67% in one year, according to a survey of 19 fund managers by OnValues, the Swiss sustainable research company.
The survey found that the fund managers were now running CHF30bn in sustainability assets, up 67% from 17.9 billion CHF at the end of 2006. Including assets managed in Switzerland for overseas investors, the total reached CHF34bn. Significantly, for the first time high net worth and retail investors overtook institutional investors in terms of volumes invested to represent 53% of the Swiss sustainability market. The report said this was largely due to increased demand by private banking institutions and their clients for sustainable investments.
In a breakdown of the success of fund managers in winning sustainable business, the survey said SAM was leading with 22.1% of market share, followed by Sarasin with 17.4% and UBS in third place with 12.1%. The following managers were: Credit Suisse (10%) Ethos-Pictet (9.3%), Swisscanto (7.6%), Vontobel Raiffeisen (6.4%) and Zürcher Kantonalbank (2.7%).
Additionally, the survey showed that investment funds now count for 55% of the Swiss sustainable market, withsegregated mandates at 41% and structured products accounting for 3.4%. In terms of assets, equities dominate, receiving 82.8% of investment, against 10.8% in fixed income, 1% in money market funds, and 0.8% in private equity. Negative and positive portfolio screening remain the respective first and second most important sustainable strategies, although the survey said the growing trend was in themed investment funds. In a subset study of 15 asset managers regarding take up of the three biggest sustainability themes in order of size: sustainable water, renewable energy/efficiency and climate change, the survey said assets invested had reached CHF21.67bn at the end 2007, of which CHF11.98bn was invested in so-called pure-play investments without additional ESG analysis, while the remaining CHF9.69bn included an analysis of ESG themes. Investment in these three largest themes was lead by retail/private banking clients, which represented 80% of total assets. Only water and renewable energy investments were successful in capturing institutional money.
The survey said themed investments were almost exclusively equity-based, with 68% in large cap and 27% in small and mid-cap stocks, with the remainder in

private equity investment. In the broader survey, fund managers said the most important sustainability theme likely to emerge over the next few years is sustainability in emerging markets – notably in infrastructure and energy assets. It said respondents seemed “convinced that the combination of investment opportunities and the huge sustainable development issues offer promising products for investors.” The second most important theme is new materials/recycling. The third is sustainable commodities (timber and second generation biofuels) with microfinance in fourth and healthy living in fifth. Asked to name the biggest future challenges for the growth of sustainable investment, the fund managerssaid the most significant was exaggerated investor expectations with regards to risk-adjusted returns. Second, they said was the limited investment universe and risk of bubble building. Third, they said, was the risk of investors being deluded by low quality concepts and products brought to market by opportunistic fund managers, The final challenge, they said was the need to propose new, innovative themes, and back them up with know-how and capacity.
The surveys were part sponsored by Bank Sarasin, Ethos, SAM, Swiscanto, UBS, Vontobel and Zürcher Kantonalbank.
Download the survey