Study shows norms-based screening posts ‘explosive’ growth as sustainable investment strategy
The European market for sustainable and responsible investment is increasing in sophistication and the percentage of investments devoted to responsible investment strategies has outgrown the overall market, according to a study by the European Forum for Sustainable Investment (Eurosif).
The portion of the market comprising investments from institutional investors rose to 94 percent in 2011 from 92 percent in 2009, with a slight majority of the assets in the form of bonds, according to the study. The remainder of the market comes from retail investors.
The report also concludes that the variety of strategies and combinations of strategies used to invest sustainably increased sharply between 2009 and 2011.
In an analysis of the top seven responsible investment-based strategies, norms-based screening, which focuses on screening investments through a series of environmental, sustainable and governance guidelines set out by the UN and others, was shown to have grown 137 percent in volume between 2009 and 2011 to cover $2.3 tn in assets under management.
Norms-based screening grew at the fastest rate in Italy, posting a compound annual growth rate (CAGR) of more than 1,000 percent between 2009 and 2011 to $314 bn, the study shows.
In France, the strategy posted a CAGR of 528 percent over that period to $680 bn and grew at a CAGR of 151 percent in Poland, a novice investor in this area, to a modest $13 mn.
‘Norms-based screening is a comparatively recent strategy that has its origins in the Nordic countries,’ notes the report.
‘Since it was first measured as a separate strategy in 2010, its adoption by asset managers has been explosive. The reason for this appears to be a desire by many asset managers and owners to avoid companies in breach of one or more internationally recognized norms covering ESG practices.’
In second and third place are the strategy of exclusion of specific sectors, with a 119 percent gain, and best-in-class investing, with an increase of 113 percent.
The exclusion strategy excludes investments in companies involved in activities such as weapons manufacturing, animal testing, pornography or tobacco, while best-in-class focuses investments on companies that are the best, or most-improved, within a specific sector.
‘The study shows the continuing sophistication of a fast-evolving market as several players are adopting multiple responsible investment strategies, often in combination,’ says François Passant, executive director of Eurosif, in a statement.
‘This sophistication highlights the need for enhanced transparency and clarification of practices. It also surely supports our conviction that SRI has the potential to bring some answers to the growing concern by society and policymakers about reconciling finance with long-term, sustainable growth.’
