Good investments: So-called “responsible investment funds” grew by nearly 20% over two years, consultancy KPMG and industry group Alfi have said.
Money placed in mutual funds that have a “good” purpose has increased by nearly a fifth over two years, a new industry survey has revealed. There was €238 billion in total assets under management at “responsible investment funds” in Europe at the end of last year, up 19% from €200 billion at the end of 2010, according to KPMG and Alfi’s European Responsible Investing Fund Survey 2013.
To run such funds, managers use “socially responsible” criteria to screen out companies that engage in undesirable behaviour--like having exploitative working conditions in factories--or trade in an undesirable sector--for example, armaments. Europe is home to about 65% of all such assets worldwide, the research found (also see Delano’s April 2013 cover story).
Within Europe, the Grand Duchy and France together account for more than half of assets under management at responsible investment funds. France holds 26%, down from 33% in the 2012 study, and Luxembourg is home to 25%, up one point from the previous report. Norway and Denmark each have 8%, while Finland claims 7%.
The Grand Duchy is home to the largest number of the 1,775 responsible investment funds tracked by the KPMG-Alfi study: 28%. The top five are rounded out by France (14%), Belgium (11%), Denmark (6%) and the UK (5%).
“It is an exciting area and it is steadily gaining momentum with investors showing a growing interest in investment strategies that integrate environmental, social and governance (ESG) criteria into their investment process,” co-authors Nathalie Dogniez and Jane Wilkinson (photo) of KPMG in Luxembourg (photo) said in the report, which was released at Alfi’s responsible investing conference on Wednesday.
France leads in cross-sectoral funds
Indeed, nearly two-thirds of funds in the study screen securities against criteria such as the UN Principles for Responsible Investment and other international standards. Such “cross-sectoral” ESG funds made up 64% of all responsible investment funds and represented 83% of all assets under management: €198 billion. France had the most assets under management in the category (30%), followed by Luxembourg (22%) and Norway (9%), KPMG and Alfi estimate.
Luxembourg was home to the largest amount of assets in funds dedicated to environmental objectives, including renewable energy, water and forestry (45%), followed by Germany and Switzerland (both 5%).
The Grand Duchy also led in the social category, which includes microfinance and social entrepreneurship funds (46%), followed by the Netherlands (18%) and France (14%).
The UK was the largest domicile of ethical fund assets (64%), largely due to its success in marketing Sharia-compliant funds, followed by Luxembourg (21%) and Ireland (10%).
The survey covered mutual funds domiciled in Europe, but not pension and insurance company assets, the writers explained.