Stockholm (NordSIP) – Eurosif, the European Sustainable Investment Forum, this week published its 2018 Eurosif Market Study, the 8th such edition, revealing sustained growth for most SRI (Sustainable and Responsible Investment) strategies over the past two years and clear signs of SRI becoming integral to European fund management. The 2018 SRI study is being presented as a “landmark” and as a manifesto in support of the Action Plan on Sustainable Finance in support of European policy changes on sustainable finance that promise to fundamentally change the financial sector.
The 2018 SRI Study offers a measured representation of the European SRI industry over the past two years across a range of investment approaches defined by Eurosif with data covering institutional and retail assets from 12 different European markets at the end of 2017 (including Denmark and Sweden). Methodology and taxonomy remains essentially the same as in past editions, though some survey questions have been upgraded to allow for further insight on various considerations surrounding impact investing in line with the SDGs and social finance.
“Going forward, we expect to see more clarity on definitions and metrics regarding sustainable investing, to give more guidance to investors and reduce the risk of greenwashing in our industry. There seems to be needed more work regarding what constitutes an SRI investment and clear criteria that define the investment process. This needs to be coupled with increased transparency and defined standards. Investors need to be protected and appropriately informed. Our industry has clearly grown out of a niche now and it needs to continue evolving towards mainstream,” Eurosif Executive Director Flavia Micilotta and President Will Oulton conclude in their foreword.
Among the most significant findings in the study:
– Institutional investors are fundamentally the basis on which regulators hope to build to fill the estimated investment gap of €180 billion of additional investments every year until 2030 to reach the European Commission’s climate targets;
– There has been a positive uptake of the retail market in favour of sustainable and responsible investing with an incremental increase in demand in the retail sector over the past four years;
– The increase in demand is not matched by adequate product offer, however, with too few opportunities for retail clients to invest according to sustainability preferences;
– Legislation is also lagging behind, with the specific legislation shaped by MiFID I and II still doesn’t contain specific requirements to embed sustainability as part of clients’ investment preferences;
– There is an information asymmetry between perceptions on behalf of financial advisers that sustainability-oriented products present a negative trade-off with returns despite academic studies suggesting the opposite;
– There is still a lack of definitions and clear metrics for sustainable investing leading to a more general concern over greenwashing hampering the offer of SRI products; concerns regarding the lack of expertise or right product offering remain top issues and fuel the debate surrounding transparency and comparability of indicators;
– The main factors motivating investors to choose SRI are connected to the desire to address climate change and other environmental issues; the two main factors highlighted by respondents were the importance of capitalising on financial opportunity represented by sustainable investing and the generational transfer of wealth;
– Increasing amounts of investment corroborate positive trends across the investment industry, with growth remaining consistent across all strategies at the European level except for Norms-based Screening and Exclusions;
– The most positive sign across strategies’ growth was the one registered for Engagement and Voting, which gave a clear indication of investors’ willingness to engage with companies they invest in and positively contribute to sustainability of the business model;
– Exclusions is still the most prominent strategy in terms of assets with tobacco as the most popular exclusion criteria;
– Best-in-class and Impact Investing registered positive uptakes, while norms-based screening lost traction as investors appear to be looking elsewhere for exclusion-related strategies.
“European and global capital markets are one of the most powerful tools we have in the fight against climate change. But they are also one of the most overlooked. So we need initiatives like the present SRI study to map and measure the growing market for sustainable investment. And we need action from EU co-legislators to reach agreements on the policy proposals we have put forward, still within the current political cycle of the European Parliament. But most of all, we need investors all over Europe and the world to seize the opportunity to fund the transition to a sustainable and low-carbon economy, before we run out of time. If we can do that, we will not only help to preserve our planet and our way of life, but we will create millions of jobs in the process, and position Europe as a technological leader in the transition to a low-carbon economy,” said Valdis Dombrovskis, Vice-President of the European Commission for the Euro and Social Dialogue and Responsible for Financial Stability, Financial Services and the Capital Markets Union.
Read the report here.
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