By the Social Investment Forum
Although the 2010 Trends report concentrates on sustainable and socially responsible investing in the United States—and only the assets of investors in the United States are included in the $3.07 trillion measured here – SRI strategies are nevertheless an increasingly global phenomenon, with an expanding reach into capital markets around the world. This section documents the regional diversity of sustainable and socially responsible investing around the world as well as transnational coalitions that are shaping global and regional trends in responsible investing.
Europe
European investors express a generally high level of interest in sustainable and socially responsible investment issues. According to the 2010 European SRI Study, conducted by Eurosif, the total value of European assets under management engaged in sustainable and responsible investment was approximately €5 trillion at the end of 2009, up about 87 percent from the €2.7 trillion the Eurosif survey found at year-end 2007. Eurosif notes that: “These numbers may appear high to the reader, but…large asset owners in many domestic markets have now adopted integration strategies for screening of specific criteria such as climate change factors across their portfolios – this is a major shift in the SRI field and helps to explain the growth in the total SRI figures…” See http://www.eurosif.org for more information. The 2010 Eurosif study gauges SRI activity in the 13 countries it covered in the previous report (Austria, Belgium, Denmark, Finland, France, Germany, Italy, the Netherlands, Norway, Spain, Sweden, Switzerland and the United Kingdom) plus six more – Cyprus, Estonia, Greece, Latvia, Lithuania and Poland. It says that SRI is still in its infancy in the six new countries, but is poised for growth.
Eurosif divides the total SRI figures into two components. “Core” SRI—which it defines as exclusionary screening based on at least three norms- or values-based criteria, or positive screening such as “best-in-class” approaches—accounts for €1.2 trillion of the total. “Broad” SRI—which Eurosif defines as one or two exclusion criteria, corporate engagement on ESG issues or the integration of ESG criteria into the investment process—accounts for €3.8 trillion. Eurosif notes that the practitioners of broad SRI tend to be large institutional investors. Altogether, SRI assets appear to account for a substantial portion of all European assets under management, which Eurosif suggests may total €11.6 trillion, based on figures provided by the European Fund and Asset Management Association in 2008 and accounting for growth through year-end 2009.
In 2010, Eurosif also released a report on the extent to which high-net-worth individuals are integrating environmental, social and governance issues into their investment decision-making and ownership practices. Eurosif estimates the 2010 European high-net-worth investor market in sustainable investing to be approximately €729 billion, an increase of 35 percent over the two-year period since the data was previously collected. See http://www.eurosif.org for more information. Eurosif has also been active on the policy front. In 2009, the European Commission, in response to ideas proposed by Eurosif, organized a series of workshops to promote disclosure of ESG information useful both to the companies that disclose it and for stakeholders that may require it. The conclusions of these workshops were discussed during an EU-wide conference in late March 2010. At that time, Eurosif issued a statement lamenting the “scattered” international and European initiatives on ESG disclosure and said it supported:
- A combined approach to corporate reporting as one of the levers to embed sustainability in corporate strategy and management practices; and
- A mandatory regulatory approach to ESG disclosure and reporting at the European level, as long as it provides companies with some latitude of choice in terms of content.
Canada
Canada’s Social Investment Organization (SIO), in its Canadian Socially Responsible Investment Review 2008, documented Canadian SRI assets as having grown from CDN$503.6 billion at year-end 2006 to more than CDN$609.2 billion at the end of 2008. Seehttp://www.socialinvestment.ca for more information. It noted that this 21 percent increase in SRI assets occurred over a two-year period “when markets generally experienced great difficulty.” The SIO reported a 5.6 percent decline over this period in “core” SRI assets, which include screened investments, community development investments and socially responsible lending assets, from CDN$57.39 billion to CDN$54.17 billion. More than compensating for this decline was the growth in “broad” SRI, which includes ESG integration, corporate engagement, proxy voting and sustainable venture capital, which rose from CDN$446.2 billion to CDN$555.1 billion, primarily because of a small increase in the number of pension plans and endowments with responsible investment policies, as well as asset growth by pension funds with existing responsible investment policies. The SIO reports that this growth was partially offset by a decline in asset managers with institutional mandates using ESG integration strategies. Sustainable venture capital, while still only a small part of total SRI assets, continued to enjoy substantial growth between 2006 and 2008, the SIO reported.
The SIO estimates that just under 20 percent of all assets in Canada under professional management are subject to SRI guidelines.
PACIFIC RIM
Given the diversity of Asian-Pacific markets, SRI trends range widely across this region, from well developed institutional and retail markets in countries such as Australia, Japan and Korea to emerging markets where pioneering developments in microfinance have occurred.
Australia and New Zealand: Australia remains one of the leading markets for responsible investing along the Pacific Rim. In its ninth annual benchmark report, Responsible Investment 2009, covering the 12 months ending June 30, 2009, the Responsible Investment Association Australasia (RIAA) documents that “core” Australian SRI assets, including management portfolios, community finance, green loans and ethical portfolios of charities and clients of financial advisors, fell to AU$15.83 billion in 2009 from AU$17.71 billion in 2008 and $19.4 billion in 2007 – See http://www.responsibleinvestment.org for more information. The major factor in the decline, RIAA reports, was the decline in the Australian stock market over this period. However, from 2008 to 2009, positive net inflows into SRI accounts amounting to $185 million were noted. Another bright spot in the year under study, Responsible Investment 2009 reported, was community finance, where the 12 providers in the field saw their assets increase 14 percent from $863 million to $980 million.
The report also identified AU$59.9 billion in “broad” SRI assets, which RIAA defines as including the integration of ESG issues into financial analysis, as well as company engagement and shareholder voting processes. Assets involved in corporate engagement (dialogue) grew quickly, from AU$50.1 billion in 2007 to AU$57.1 billion in 2008 and AU$59.9 billion in 2009. However, as of mid-2009, RIAA reported, for the fourth consecutive year, no specific shareholder resolutions on social or environmental issues were filed at Australian companies in contrast to the considerably higher levels of shareholder involvement in the United States.
RIAA’s report also documents NZ$14.8 billion in responsible investment assets in New Zealand, down from NZ$15.9 billion the previous year. The decline was largely due to the decline in market value of assets by the New Zealand Superannuation Fund, which accounts for the lion’s share of responsible investing assets in the country.
In recent years, RIAA has developed the world’s first certification program for providers of responsible investment products and services, and in 2009 it introduced Version 3.0 of its online course for financial advisors.
In 2010, with the assistance of a major grant from the Australian federal government, it launched Responsible Investment Academy, a global online center for education and training on responsible investing.
Elsewhere in Asia: According to the Association for Sustainable and Responsible Investment in Asia (ASrIA), there are now more than 417 active SRI funds, including faith-based funds, in China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, Singapore, Taiwan, Thailand and Vietnam.
KoSIF, the social investment association in South Korea, reports that in 2009, the total SRI fund market totaled 3.58 trillion Korean won (about $3.2 billion), with the National Pensions Service alone accounting for 1.3 trillion KRW. Retail funds account for 1.2 trillion KRW and private equity funds for 1.1 trillion KRW. The National Pension Service, Korea’s State Pension Fund, has played a pivotal role behind the growth in SRI funds in the country, from two SRI funds in 2005 to 69 today, by setting SRI pension mandates for the private sector. Hong Kong, Taiwan and Singapore have also shown success in attracting funds for global SRI products. Islamic Shari’ah funds predominate in Malaysia, Singapore and Indonesia.
Africa
June 2010 marked the launch of AfricaSIF, an independent, not-for-profit pan-African network, to promote sustainable investment across the continent. The vision of its founders is to “have investment decisions in Africa contribute to sustainable development on the continent…. We believe that the global finance and investment sector practicing its profession in/into Africa can advance sustainable development through integrating ESG factors in all investment decisions and helping to achieve the Millennium Development Goals.”
See http://www.africasif.org for more information.
