Retail SRI Demand Is Not Being Met11.30.2018
Retail assets in sustainable and responsible investment (SRI) strategies have grown tenfold since 2014 but there is not enough product to meet this demand according to the latest biennial study from Eurosif, the association which promotes SRI investment in Europe.
Overview of 🇪🇺#SRI strategies: Much change has happened in the last2⃣years, which will have repercussions all over the next years. This 2018 edition’s results show signs of consolidation in the #SRI sector. Read our 🇪🇺 #sristudy2018 https://t.co/iSY8F7iTdN pic.twitter.com/41IqnRd4h1
— Eurosif (@Eurosif) November 27, 2018
Eurosif collected data on institutional and retail assets at the end of last year from 12 European markets.
The study said: “Environmental, social and governance integration remains by far the preferred strategy, growing by 60%. This is a very positive record, marked at over €4 ($4.6) trillion of assets under management, which indicates that almost every asset manager that responded to the survey implements some form of ESG integration.”
The study highlighted the growing demand from retail investors as a pool of potential capital. However, this increase in demand is not being matched by adequate products.
“In fact, still too few retail clients currently have the opportunity to invest according to sustainability preferences,” added Eurosif. “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.”
In addition, many financial advisers still believe that sustainable products provide lower returns, despite multiple academic studies reaching the opposite conclusion.
“We hope that the work of the European Commission to continue defining and reshaping investment criteria and sustainability standards will bring further clarity in terms of minimum standards for responsible investing that can be clearly recognised by investors,” said Eurosif.
Although retail demand has increased, regulators are still relying on institutional investment to fill the estimated $180bn gap of additional funds needed every year until 2030 to achieve the European Commission’s climate targets.
“The lack of definitions and clear metrics still hampers our industry,” added Eurosif. “In fact, in this review we clearly notice how the general discussions around definitions are leading to a more general concern for greenwashing, gaining ground as part of the barriers to SRI in general. “
The European Commission is aiming to address these concerns by recommending standards and a taxonomy for sustainable finance products.
The study continued that investing based on the Sustainable Development Goals looks set for further growth. In 2015 the United Nations adopted the Sustainable Development Goals in 2015, comprising 17 goals targets and indicators for success. The SDGs aim to provide a roadmap to help organisations navigate the environmental, social and economic challenges the world faces.
Poor SDG reporting
Almost three quarters of organisations, 72%, now mention the SDGs in their annual corporate or sustainability reports, according to a study by PwC.
— PwC (@PwC) November 30, 2018
However the report, From promise to reality, also highlighted that most firms have not identified concrete measures to meet the SDGs or described how they are being integrated in their business. The consultancy reviewed the corporate and sustainability reports of more than 700 listed companies in 21 countries across six sectors.
The study said half of the companies have identified priority SDGs but less than one third, only 28%, disclose meaningful key performance indicators related to the goals. The top three priority goals identified by companies were decent work and economic growth (SDG 8); climate action (SDG 13); and responsible consumption and production (SDG 12).
The average score for reporting quality of those companies that had prioritised SDGs was only 2.71 out of 5.
Louise Scott, global sustainable development goals lead at PwC, said in a statement: “Progress on broad awareness and integration is a positive step for the SDGs, but it’s only a small step. While there is a clear appetite for embracing the SDGs, many organisations still lack the strategy, tools and culture needed to transform those commitments into tangible business actions.”
Tradeweb’s credit trading solutions and data will be integrated into BlackRock’s Aladdin.
Despite difficult circumstances, demand for SFDR Article 9 funds remained sustained.
Janus Henderson traders use a broad spectrum of electronic tools to optimize the search for liquidity.
Florida CFO said ESG standards are being pushed by BlackRock for ideological reasons.
The new regime requires a new investment playbook involving more frequent portfolio changes.