UK funds industry body puts responsible investment assets at around £2 trillion

The UK’s Investment Association (IA) has said £2trn (€2.2trn) of UK assets are managed “to some form of responsible investment criteria” in its annual survey on investment management – although that number comes with caveats.

The IA suggests the figure could be inflated, saying: “It is difficult to estimate total investment in dedicated responsible investment approaches as it is likely that there will be significant overlap in some of the reported totals.”

It is the first time that the IA has provided a detailed breakdown on responsible investment from its 200 members using definitions from the Global Sustainable Investment Alliance (GSIA), a membership body of global sustainable investment forums.

The GSIA definitions have six categories: ESG integration, negative screening, positive screening, norms-based screening, sustainability-themed investing and impact investing.

Using the GSIA framework, the IA found 26% of total UK assets of £7.7trn, or £2trn, are managed to some form of responsible investment criteria – the majority using ESG integration.

UKSIF, the UK sustainable investment forum, told RI its best estimate for the country’s responsible investment market was around £1.8trn (using data from December 2017).

Policy Head Ben Nelmes said he welcomed the IA’s findings. “It confirms what our members tell us: the UK is home to a strong and growing sustainable finance sector.”

Commenting on how reliable the £2trn figure is, Jess Foulds, Policy Specialist, Capital Markets at the Investment Association, said: “With such a fast moving segment of the industry, people are currently interpreting approaches differently.

“There isn’t yet a consensus on definition and measurement. We are in a stage of transition and working to define what the different terms mean. I think next year we should be able to see more clearly what the numbers should be and the direction of travel.”

Going forward, the IA plans to develop its own industry-agreed responsible investment framework with a glossary of definitions that it will use for future surveys it conducts.Last year, the Investment Association said it was looking at a labelling system for UK responsible funds.

Commenting on the status of the label, Foulds said: “The Investment Association has been consulting on definitions and labelling, and is carefully considering the way forward, both on substance and timing. We will be providing more detail in the coming months.”

The Investment Association has been consulting with members on sustainability and responsible investment as part of a SRI committee formed last year.

Joanthan Lipkin, Director for Policy, Strategy and Research at the IA, said: “The whole debate about responsible investment fits into a broader set of changing expectations about the role of asset managers in the wider economy. We are in a period of unprecedented change in terms of the expectations both of how we serve our customers but also the role we play in the economy and that theme is central.”

Overall, the Investment Management in the UK 2019-2019 survey found assets under management by IA members had flatlined at £7.7trn by the end of 2018, though the UK still remains the second largest investment management centre in the world.

Commentary Daniel Brooksbank

Just how big is the responsible investment market? As this story shows, it is not easy to measure. But we live in a world of blockchain, big data, artificial intelligence etc. so it’s no longer enough to rely on guesstimates if the sector is to be credible going forward.

It should be noted that the IA figures are based on self-reported data and there’s a risk of ‘garbage in, garbage out’ that could prove counterproductive. Last month Morningstar said assets in Europe in what it terms its sustainable fund universe had reached a record €595bn, i.e. totally at odds with the IA findings. I’m not saying the IA is wrong, just flagging up again the need for clearer definitions.

As Morningstar itself said, “identifying and categorising sustainable funds remains a challenge”. It highlighted the fact that managers are re-branding funds as sustainable. Responsible investment is growing, that is undeniable. But this lack of reliable data is a stumbling block.