European SRI assets hit five trillion euros

By Doug Watt | October 13, 2010 | Last updated on October 13, 2010
3 min read

A study out of Europe has found that assets held in socially responsible investment mandates have soared to €5 trillion, a “spectacular” 87% increase from €2.7 trillion euros in 2008.

Eurosif’s 2010 study of European SRI assets 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, while broad SRI, representing simple exclusion, engagement and integrations approaches, was estimated at €3.8 trillion.

“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, says the report confirms the impression held by the global SRI industry that the meltdown of 2008 did little to slow social investing’s momentum. “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 report says.

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

Bonds are now the favoured asset class of European SRI investors, at 53% of AUM, 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 United Nations Principles for Responsible Investment.”

Surprisingly, the survey reveals that the global financial crisis had a more positive than negative impact on the SRI industry, with respondents saying the 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 (SIO) has been releasing similar biennial reports on the Canadian SRI market since 2000.

The 2008 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.

Doug Watt is an Ottawa-based writer and editor and co-founder of SRI Monitor, a blog on socially responsible investing.


Doug Watt