Wednesday, October 13, 2010

European SRI assets nearly double to five trillion euros

Eurosif today released its 2010 study of European SRI assets, which revealed a “spectacular” 87% increase to five trillion euros, up from 2.7 trillion euros in 2008.

The European study breaks down responsible investment assets under management (AUM) to Core SRI and Broad SRI. Core SRI, consisting of values-based exclusions and positive screens, totalled 1.2 trillion euros, while Broad SRI, representing simple exclusion, engagement and integrations approaches, was estimated at 3.8 trillion euros.

“SRI has shown a remarkable resilience to the ongoing global financial crisis, in spite of evident country variations,” the study says.

Eugene Ellmen, executive director of Canada’s Social Investment Organization agrees that the report confirms an impression held by the SRI industry worldwide that there has been continuing buoyancy even after the meltdown of 2008. “In the European case, this has been led by some explosive growth in ESG integration, which is the growing use of tools to incorporate environmental, social and governance factors into investment analysis and practice,” he added.

The European SRI market remains driven by institutional investors, representing 66% of total AUM. “These investors are especially active in some of the larger European markets, such as the Netherlands, Switzerland, the Nordic countries and the United Kingdom.”

The share of retail investors has also increased in nearly all countries covered in the study, 19 in all, including for the first time, Poland, Greece, Cyprus, Estonia, Latvia and Lithuania. “The Eurosif research shows that Austria, Germany, Belgium and France have all seen their share of retail markets increase notably.”

Bonds are now the favoured asset class of European SRI investors at 53%, while equities have dropped to 33%. This is partially explained by the dominance of institutional investors, who traditionally allocate substantial funds to fixed income investments.

Microfinance funds are also beginning to generate interest from SRI investors, with survey participants noting the need for asset diversification in their portfolios.

“A vast majority of SRI investors predict that demand from institutional investors will be the main driver for SRI growth in the next three years,” the study notes. “Other important drivers include demand from retail investors, media coverage, legislation and international initiatives, such as the UNPRI.”

Perhaps surprisingly, the survey reveals that the global financial crisis had a more positive than negative impact on the SRI industry, with respondents saying that the financial crisis made them more aware of the need to integrate ESG risks. “From a demand perspective, the increase for more transparent products has correlated well with the SRI philosophy. Environmental and social crises have also acted as a wake-up call for many investors.”

This is the fourth time (2010, 2008, 2006 and 2003) Eurosif has released a detailed report on the European SRI market. Canada’s Social Investment Organization has been releasing similar bi-ennial reports on the Canadian SRI market since 2000.

The 2008 Canadian report concluded that assets invested according to socially responsible guidelines increased to $609 billion, a 21% increase from 2006. “In Canada, the SIO will be conducting research this fall to determine the size and scale of the industry as of June 30, 2010,” Ellmen notes. “We don’t expect to see the same kind of growth reported in Europe, but we do expect to see some increase from our figures in 2008, due to growth from large public pension plans, foundations, high net worth individuals and the retail sector.” The next SIO report is due in early 2011.

Read the full Eurosif study.

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