Sophisticated strategies underpin surging growth of European SRI market

Europe’s SRI growth is outperforming the market, with investors adopting a wider and more sophisticated array of investment strategies, says the European Forum for Sustainable Investment (Eurosif) in its 2012 SRI study.

The growth is being driven by institutional investors, which hold 97% of the market, and many of their SRI strategies are employed in combination, covering sustainability themes, best-in-class ratings and norms-based screening.

The last of these, norms-based screening, is the fastest-growing strategy, with an estimated €2.3tn (£1.9tn, $3.0tn) assets under management (AuM), representing growth of 137% since 2009. In addition, funds which exclude specific sectors, companies or practices and apply best-in-class strategies have seen AuM growth of 119% and 113% respectively.

The impact investing market is included in the survey for the first time, reflecting increasing investor interest, and has reached an estimated AuM of €8.75bn.

Amsterdam-based TBLI Group puts the total European SRI market at €6.76tn ($8.81tn, £5.46tn).

Eurosif executive director Francois Passant said: “The study shows the continuing sophistication of a fast-evolving market [and] highlights the need for enhanced transparency and clarification of practices.

“It also supports our conviction that SRI has the potential to answer the growing concern about reconciling finance with long-term, sustainable growth.”

Meanwhile, there has also been a huge expansion of SRI funds in emerging markets, with allocations growing by nearly 30% since 2009, according to a study of more than 40 finance houses by Ethical Investment Research Service (Eiris) .

The Brazilian and South African governments were the most active in encouraging ethical conduct, Eiris said, with China, Hong Kong, India, Mexico and Turkey progressing well.

The biggest obstacle to investing in emerging markets, mentioned by 78% of surveyed investors, was poor disclosure of ESG data.