A bright future for sustainable finance in Europe

At the end of November, Eurosif released its biannual SRI (Socially Responsible Investment) Market Study report. This eighth edition presents an overview of the evolution of institutional and retail assets from across twelve different European markets. Through its study, Eurosif raises awareness on sustainable finance and demonstrates how the market has evolved on this specific topic over the last few years.

The study confirms the positive progress of SRI investments across Europe. Institutional investors remain the main contributors with a focus on supporting the objectives of the European Climate target (to raise €180 billion annually).

In the past four years, we have also seen an increase in demand from the retail market. However, Eurosif elaborated that the current increase in demand is not met by adequate product offering, as few retail clients currently have the opportunity to invest according to sustainability preferences. The Eurosif report highlights that “legislation has not helped improve things, as specific legislation mostly shaped by MiFID I and II, still contains no specific requirements to embed sustainability as part of the investment preferences discussed with the client. Added to that, many financial advisers still today perceive sustainability-oriented products as presenting a negative trade-off with returns – despite multiple studies pointing to the opposite.”

The study shows that the European Commission’s willingness to provide clarity on the definition of sustainable finance is aligned with the market expectation. In May, the European Commission proposed a concrete action plan on sustainable finance that will address the need for more transparency with regard to the definition of sustainable finance and guide investors in the right direction. One of the most important elements of this action plan will be the investors’ duties and disclosure with the objective to increase the number of assets under management with a sustainable strategy focus. There will be a need to provide more information on non-financial performance and risk management for these types of products.
The SRI market development is led by investors motivated by the desire to address climate change and environmental issues. The fulfillment of the Sustainable Development Goals is now often embedded within the investment decision-making process.

When it comes to investment strategy, the study reveals that ESG integration remains the current preferred strategy with an increase of 27 percent compared to the last edition (21 percent of total AuM). Consequently, the exclusion strategy showed a small decrease, although it remains dominant in terms of assets (47 percent of total AuM).
Impact investing rose by 52 percent over the last six years and is increasingly aligned with the Sustainable Development Goals.

The survey covers 263 asset managers representing 79 percent of the total European asset under management. Another growing trend is the participation of the retail sector, from 3.4 percent in 2014 to 30 percent of asset surveyed this year.

In other words, the appetite for socially responsible investments (SRI) is definitely there ! The development of a concrete policy will support a dynamic market maturity. Now we must leverage on this wave of interest and continue to raise awareness around sustainability challenges.

News Deloitte
Written by Julie Castiaux, Senior Manager Sustainability Services Deloitte