Since 2012, the number of funds increased by 6%, while the AuM increased by 56%, to EUR 372 billion. The photo of the sector in The European Responsible Investing Fund Survey 2015 by Kpmg
More than 1,870 funds with total assets under management of EUR 372 billion, that means a growth of 56% of the AuM since 2012, where the assets were less than 238 billion, while the number of funds increased by 6%. This is the photo of the sector that was taken in the European Responsible Investing Fund Survey 2015 by Kpmg. “In comparison to the European fund market as a whole, this represents 3.3% of the total assets and 3.4% of the total number of funds – the study said - However, although still very small, the proportion of responsible investing (RI) assets has increased by 0.5% since to 2012”.
The RI market
According to a report by Global Sustainable Investment Alliance (GSIA), the estimated size of the global sustainable investment market is at least USD 21.4 trillion at the beginning of 2014 from 13.3 trillion of the beginning of 2012. This market is driven by Europe, representing more than half of the total assets. Moreover, the United States as well as Canada and Europe have seen the largest growth rates.
The segmentation of funds
About defining and categorising RI strategies, funds had split in categories between cross-sectoral funds and thematic funds, using the widely accepted concept of Environment, Social and Governance “ESG” as classification.
“Looking at the segmentation of funds, more than two thirds of the RI funds apply either a positive or a negative screening of their potential investments rather than any particular investment theme (e.g. environmental). Back in 2012, the ESG (cross-sectoral) funds represented around 83% of the total AuM of the RI universe.This share has increased to 87% in 2014 – Kpmg explained – So, thematic funds (being environmental, social or ethical in focus) represent approximately one third of the RI funds landscape in terms of number of funds, but only 13% of the AuM in 2014”.
Geographical diversification and portfolio composition
The majority of the RI funds analysed invest globally and do not apply geographical restrictions over their investment universe. 23% of the European RI funds invest in the Eurozone or in Europe at large.Whilst funds investing purely in emerging markets solely represent 5%, “our discussions with asset managers indicate that this is a growing market for RI investing as the quality of the extra-financial information of target investments continues to improve - the analysts declared - Across RI funds, investments in equities represent 41% of the total AuM at the end of 2014, which represents a significant increase compared to the 34% level at end of 2012. Assets invested in bonds represent 25% of the total assets in 2014. As for money market funds, their share decreased from 22% in 2012 to 14% in 2014.This can almost certainly be attributed to the levels of returns available on different asset classes”.
Challenges: what could an investor look like in 2030?
According to the latest Eurosif study, the RI market continues to be dominated by institutional investors: in fact, the RI retail market represents only 3.4% of the AuM (compared to 5.9% 2 years previously).
The Kpmg study shows, however, that from a distribution perspective, it was expected that institutional investors will continue to lead the way, but that there is potential for the retail market to grow through clear and tailored messaging.
“By 2030 we can expect investors to be fully embracing the ESG factors which still seem to be optional today – the reserch said - Investor profiles will become more varied, institutional investors will continue to evolve – sovereign wealth funds are likely to play a greater role and new savings vehicles will emerge. Investors will become more engaged and will need longer-term, yet more flexible solutions”. According to Kpmg, investors are likely to expect a personalised service model and will look for a brand they can trust. “Simplicity, transparency, honesty and integrity are likely to be regarded as more important buying criteria, maybe even at the expense of financial performance” experts said.
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