The UK and Holland continue to lead the way with €781bn and €47.5bn respectively in SRI mandates at the end of 2005, according to a new study by Eurosif.
Belgium and France trail a distant third and fourth with €149bn and €13.8bn respectively of managed SRI assets.
Thanks mainly to the involvement of the €70bn Dutch pension fund PGGM, Holland is the largest market for core SRI which consists of ethical exclusions as well as different types of positive screens such as best-in-class.
The report commented that rapid growth in the Dutch market would not happen until large pension funds like ABP and PGGM fully committed themselves to SRI. It noted that the €190bn ABP – Europe’s largest pension scheme – is still experimenting with two SRI funds worth €240m and that it could take another five to 10 years before the fund evaluates the return on investment and makes a decision whether or not to increase its SRI allocation.
The core SRI strategy has also found favour with institutional investors such as Ethos in Switzerland, the Environment Agency in the UK and the Fonds de Réserve pour les Retraites in France.
However, the survey revealed that UK fund managers, as part of a broader approach to SRI, preferred to engage with companies about their social, environmental and ethical performance and to integrate such issues into their investment decision-making.
Overall, the European core SRI market is static compared to the broader SRI market, which Eurosif estimated to be as high as 10-15 per cent of total European funds under management.
The survey noted that many SRI practitioners see engagement and integration as paths to mainstream adoption because such strategies are compatible with how many institutional investors view their fiduciary duty. These strategies are also considered to complement traditional financial analysis or shareholder activism in the area of corporate governance.
Eurosif found that, regardless of strategies, SRI typically focuses on large caps, which in the Netherlands, Belgium and Spain, represent 90 per cent of SRI. Half of UK fund managers perform screens on small and medium cap stocks, although investment volumes are less.
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