By Ilonka Oudenampsen
There are 1,236 responsible investment (RI) funds in Europe, managing €129.49bn and representing almost 1.6 per cent of the European investment fund market in terms of assets and 2.3 per cent in terms of number of funds, the Association of the Luxembourg Fund Industry (ALFI) has found.
The European Responsible Investing Fund Survey, carried out by KPMG on behalf of the association, found that, with a total of 704 funds, cross-sectoral environment, social and governance (ESG) funds make up the majority of RI funds. These funds invest in multiple sectors but select their investments by using negative or positive filters or screens, for instance no investments in companies which employ child labour or investments only in companies with an ESG policy in place, respectively.
Asset managers tend to favour environmental themes, as climate change/renewable energies, environmental/ecological, carbon and water are the four largest thematic sub-categories in terms of assets under management (AUM) totalling €30.49bn.
France and Luxembourg together occupy a 45 per cent market share, with Luxembourg at 28 per cent being the largest domicile in terms of number of funds and the second largest domicile in assets.
Chair of the ALFI Responsible Investing Technical Committee Thomas Seale said: “One clear result of the survey is that, if we are to foster the responsible investing movement, definitions need to be clarified and the size of the market needs to be understood. There are currently many different strands to the responsible investing movement.
“There are three key action points which come out of this survey. First, harmonised definitions across the industry are essential, and industry associations across Europe must encourage increased transparency and clarity among their members to improve data gathering. Second, asset managers should improve disclosure of their responsible investing strategies, related investment products and environmental and social impacts. Finally, we need to inform the investor community in a more coherent way about the wide array of investment vehicles dedicated to Responsible Investing.”
KPMG Luxembourg head of investment management Nathalie Dogniez added: “There are huge challenges when it comes to defining responsible investment products. Social investing, impact investing, microfinance, impact finance, sustainable and responsible investing, are terminologies that are often used in a multitude of overlapping and sometimes confusing ways. We hope that this survey will form the basis for future quantitative measures and trends faced by the responsible investment fund sector.”