European sustainable investment funds study 2021: Catalysts for a greener Europe
Sustainable funds represent a rapidly growing segment of investment solutions in Europe, according to the first annual European Sustainable Investment Funds Study by Morningstar and zeb, powered by the Association of the Luxembourg Fund Industry (ALFI).
The study aims to provide a snapshot on how sustainability objectives and the respective legislative interventions have shaped the fund industry in Europe in the last years with a particular focus on the role, competitiveness and positioning of the Luxembourg fund hub.
Sustainable fund products attracted 52% of all net new flows in 2020, and reflected 11% of total net assets domiciled in Europe at the end of 2020;
Luxembourg was highlighted as the leading domicile, with sustainable funds accounting for EUR 371 billion by the end of 2020 and capturing 44% of total net flows made across all European domiciles in 2020;
Equity remains the top asset class of sustainable funds across all European domiciles amounting for more than 60% of sustainable assets managed by funds. Inflows into impact funds are also rising at the expense of less ambitious sustainable strategies;
Passive investments also rose in the period, constituting 21% of the net assets in the European sustainable fund universe by the end of 2020;
Share of sustainable assets in UCITS and regulated open-end AIFs has risen significantly since 2018, accounting for 11% and 9% of total assets in each sub-segment respectively;
Sustainable funds market continued to be dominated by a few large asset managers, with more than 50% of net assets in sustainable funds in Europe launched by the top 20 providers.
Views from movers and shakers
As part of this study, a series of interviews and contributions from leading representatives of the fund industry were included to underline how the industry can act as catalysts for a greener Europe.
The interviews in this study are:
Implementation of Sustainable Finance Disclosures Regulation (SFDR) – an interview with Sandra Crowl, head of Socially Responsible Investing at Carmignac, discussing the impact, challenges, and costs associated with the regulation, as well as the opportunities it creates as a result.
Environmental, social and governance (ESG) fund labelling – an interview with Denise Voss, Chairwoman and Sachin Vanklas, General Manager, LuxFLAG, discussing the role of fund labels in ESG.
Regulatory and market trends impacting investment – an interview with Adriana Balducci, Head of Advisory Services at Impact on how recent regulatory and market trends have shaped the impact investment industry and what major developments can be expected in the short-medium term.
Sustainable Asset Management: Active vs Passive strategies – an interview with Nathaele Rebondy, Head of Sustainability Europe, Schroders, and Matthieu Guignard, Global Head of Product Development and Capital Markets, Amundi ETF, discussing the passive vs active debate within sustainable investment and how it has gained a new dimension in the wake of the implementation of SFDR and the Taxonomy.
Current trends in ESG Ratings – an interview with Youri Groenhart and William Ridout of Sustainalytics, discussing current trends from correlations between rating providers to impact on ratings from the SFDR and EU taxonomy.