Dynamic growth in sustainable investments driven by greater interest from institutional investors
Sustainable investment funds are gaining ground and currently account for 7% of the total fund market.
Based on the Swiss Sustainable Investment Market Report 2017, the market saw a sharp hike of 39% compared to 2015, bringing the total volume of sustainable investments in Switzerland to around CHF 266 billion as of 31 December 2016. As their importance for asset owners has steadily risen, assets from institutional investors now account for 82% of the Swiss sustainable investment market. Sustainable investment funds are gaining ground and currently account for 7% of the total fund market.
The report, which was for the second year in a row published jointly by Forum Nachhaltige Geldanlagen (FNG) and Swiss Sustainable Finance (SSF), describes the developments of the Swiss sustainable investment market in detail. The 39% increase is not only the result of organic growth, but is also attributable to an increase in survey participation. Many of the 10 newly included asset owners, for example, recently launched their sustainable investment activities over the course of 2016. This is one reason why the assets managed by institutional investors have jumped by 89% over the past year to reach CHF 104.5 billion. Sustainable investment funds have also risen by 59% to CHF 64.2 billion, with their share of the overall fund market increasing from 4.5% to 7%. By contrast, the volume of sustainable mandates experienced relatively weak growth of 2%, to reach CHF 97.6 billion.
The gradual mainstreaming of sustainable investments is influencing the selection of strategies, which many investors are also using in various combinations. The exclusion of certain sectors or business practices is still the most common approach, and is applied to 67% of all sustainable investments in Switzerland. Norms-based screening has now ousted the ESG Integration strategy from second place, and is already being applied to 62% of all sustainable investments. Many of the assets included in the survey for the first time tend to function more on a “Worst-out” basis rather than the “Best-in” principle,” explains Sabine Döbeli, CEO of SSF. “As these strategies can usually be combined with an active dialogue, it is however possible to exert considerable influence on the sustainability strategy of companies,” she adds.
Human rights are the thematic focus of this year’s market report, reflecting their growing importance in the business world. “As far as human rights are concerned, the most important norms cited are the Global Compact and the ILO Core Labour Standards,” says Patrick Wirth, Vice Chair of FNG, commenting on the results of a special survey of the study participants concerning this topic. While a large proportion (86%) of all asset managers questioned said they applied human rights criteria to their sustainable products, almost a third consider such criteria for their mainstream funds as well. The current market report also includes a case study on the Swiss Association for Responsible Investments (SVVK-ASIR), an asset owner network, which began its activities over the course of 2016.
“Sustainable investments also play an increasingly important role with respect to the implementation of the Sustainable Development Goals (SDGs), as they not only help to promote specific sustainable projects or companies, but also encourage greater emphasis on sustainability standards across business as a whole,” explains SSF CEO, Sabine Döbeli. Given this backdrop, sustainable investments are expected to continue to enjoy dynamic growth rates in future, an expectation also shared by the participants in the study.
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CEO of Swiss Sustainable Finance, in our next issue, The Beam #4, released in July.
