Today, this approach to investing ‘that aims to incorporate environmental, social and governance (ESG) factors into investment decisions, to better manage risk and generate sustainable, long-term returns’* is much more than a marketing slogan to differentiate from competitors.
Responsible investing is increasingly driven by the spreading recognition that ESG factors play a material role in determining risk and return, as well as shaping the industry. Next to the established specialized investment managers, more and more mainstream asset managers are entering the market, seizing the opportunity of this flourishing sector. Increasing thoroughness and granularity of responsible investing strategies, processes and policies enhance market sophistication and drive total growth.
Since ALFI organised its first Microfinance Conference more than 10 years ago, it refers to responsible investing as the "third pillar" of the Luxembourg investment fund industry, aligning its importance with that of the other two investment fund pillars - UCITS and AIFs.
Luxembourg has strengthened, over the years, its position as number one domicile for responsible investing funds in Europe in general and in each of the underlying strategies, accounting now for 31% of funds and 35% of total Assets under Management. ESG cross-sectoral funds applying positive and negative screening strategies remain the largest market share with 1’687 funds and EUR 423.3 billion Assets under Management.
The European responsible investing fund market has almost doubled in size since 2010, reaching EUR 476 billion of Assets under Management (AuM) managed by 2,413 funds at the end of 2016.
Assets under management encountered a growth of 26.6% from 2014 to 2016, a substantial development across all ESG-cross sectoral and thematic (Environmental, Social) categories.
The market has seen a clear boost in Climate Finance. Post-COP21, renewable energy and climate change funds increased their share to 36% in the Environment category, encountering a significant growth in the number of funds (42%) and AuM (47%) since 2014. The Luxembourg domicile again occupies the leading position in this category and accounts for 38% of funds and 45% of Assets under Management.
Luxembourg offers a comprehensive regulatory toolbox to structure Responsible investment. The choice of legal form will largely depend on the investment strategy selected and the targeted investor base.
European Responsible Fund Market Survey 2016
The European responsible investing fund market 2016 provides statistics as at 31 December 2016. This includes the size of the market, the assets under management and number of funds of different RI categories and the domicile of such funds. This report focuses essentially on investment funds domiciled in Europe. The following statistics are presented:
- Total figures
- ESG Cross-sectoral
- Esg Environment
- eSg Social
- ESG Ethics
Download the survey here.
* UN Principles for Responsible Investment (UNPRI)