A Summary of the European SRI study seminar

Richard Essex (member of EIA SG)

The seminar (organised by UKSIF and hosted by Pictet) started with an overview of the latest Eurosif report. It was pointed out that all categories of responsible investment had grown at a faster rate than the mainstream market with 4 out of the 6 categories outgrowing by more than 35%.

For Europe as a whole the fastest growing strategy appears to be ‘norms-based screening’ closely followed by ‘exclusions’ and ‘best in class’. However the pattern is different between one country and another with cultural background and outlook playing a large part in determining which categories have more influence.

It was also made clear that institutional investing still formed the majority of SRI, holding around 94% of the market.

Speakers highlighted that the UK SRI Market is predominantly institutional, forming 97% of the overall pot. Based on funds under management engagement, integration and exclusions seemed to be the most popular strategies.

The extent to which this investment was really pushing the boundaries of sustainable investment was then discussed. There was a concern from the panel that darker green strategies aimed more explicitly at solving sustainability challenges were not growing as quickly as the more moderate, less direct approaches, such as engagement.

In particular speakers highlighted how relatively small the proportion of funds in the Sustainability Themed sector was compared with SRI funds as a whole, indicating that the challenge was to increase exposure within this sector. It was mentioned that companies like Pictet specialise in this field, and in fact there is a relatively high concentration of this type of investment in Switzerland generally.

There was also a desire from parts of the panel that more effort should be made in reaching out to the retail investment market and in fact a question was posed to the audience as to how this could be done.

There was then an open forum between the audience and the panel

Questions and points included the following:

1. It was highlighted that whilst being smaller in exposure the existing retail market should not be under-estimated. It was suggested that the real force of progress on SRI came from the retail side, and that the institutional area would eventually tend to follow trends set by more cutting edge retail funds. The panel largely agreed that continual support of the retail market was essential

1. In direct response to the question of increasing retail exposure the point was made that the importance of ESG factors should enter dialogue far more within the retail field. In particular clients should be able to see potential links between ESG and greater financial sustainability. It was also requested that ESG needs to be explained in a more user friendly way for retail clients. Again there was broad consensus amongst the panel on this although the point was made that there should always be room for the more specialist ethical investor, and that by introducing ESG this doesn’t dilute the ethical and green objectives of the SRI movement.

1. This leads nicely on to a final request made that the findings of reports like the EuroSIF report should also show how the major environmental and social challenges are being improved by market growth. It was suggested that ultimately this is why we are involved