Sustainable investment as the new normal
The trend is clear: an educated investor prefers a socially responsible investment. This is indicated by studies carried out by various entities and statements by economic experts such as Tríodos Bank or Mapfre. Although this trend is lagging behind in our country in relation to data from Europe or worldwide, it is clear that we support environmentally responsible investment.
To shed a little more light on this type of investment, we will take a brief look at the most noteworthy data on sustainable and responsible investment (SRI). SRI is understood as a form of investment that, from a long-term approach, integrates environmental, social and governance (ESG) criteria into the process of study, analysis and selection of securities in an investment portfolio. It is, as specialists point out, the sum of fundamental analysis and active management, combined with the evaluation of these criteria. The objective is threefold: to achieve better long-term performance for investors, to provide a benefit for society as a whole and to influence the “social” behaviour of companies.
A look at the general trend
- What is known as shareholder activism has been awakened, which summarizes investment strategies that seek to influence and change the behavior of companies through an activist role by investors.
- A significant take-off is perceived in the integration of ESG criteria as a widespread practice in the asset management industry.
- The sum of these two factors generates a new trend and the way to prepare the company for this new trend is to integrate sustainability on boards of directors, include the long term in decision-making processes and support diversity of thought on boards, as Forética points out in its report More assets, more sustainability.
- Another report, in this case the Global Guidance for Responsible Investment Regulation, produced by the PRI (Principles for Responsible Investment) network of investors and the stock index provider MSCI, points out that in the 50 largest economies in the world there are at least 300 instruments that help investors consider long-term value factors. These include ESGs and more than half were created between 2013 and 2016.
EU supports progress towards sustainable investment
The Sustainable Finance Action Plan, developed by the European Commission in early 2018, aims to enhance the role of finance in the development of an economy aligned with the goals of the Paris Agreement and the European Union’s agenda for sustainable development based on the ODS (Sustainable Development Goals). This plan has three basic objectives:
-Reorienting capital flows towards a more sustainable economy
-Integrating sustainability into risk management
-Promoting transparency and the long term in the financial sector
Increased sustainable investment in Spain
- The Spainsif study “Sustainable and responsible investment in Spain” points out that between 2015 and 2017, the assets under ASG management in Spain reached 185,614 million euros (growth of 10%).
- The majority of the companies surveyed in this study indicate that they have advanced strategies in terms of sustainability and corporate social responsibility, with a strict code of conduct on the activities in which the entity can take part.
- Analyzing the preferences of this type of investor, it is noteworthy that the exclusion criterion has grown, between 2016 and 2018, only 9%, which means a fall in the rate of growth in recent years (around 24%). This, according to Spainsif, far from being negative is a sign of maturity: companies are beginning to include different criteria beyond the elimination of activities that they consider controversial.
- Among the criteria for choosing this type of investment, the “best in class” strategy (with 250% growth) and the integration of ASG (with 97% growth) stand out,
Sustainable and responsible investment is stable and maintains its growth both in times of market reduction and in times of expansion. This is encouraged by the evolution of companies themselves, which are becoming increasingly competitive in terms of sustainability and are moving towards more sophisticated SRI strategies.
- In relation to sustainable and responsible investment funds marketed in Spain by both domestic and foreign collective investment institutions, the number of assets under management has exceeded 30 billion, with a growth rate over the last two years of 32%, a figure higher than that of the total investment fund market creció́, over the same period, of 20%. This growth trend, with a significant role for investment funds belonging to foreign institutions, has influenced national collective investment institutions, whose number of marketed ASG investment funds has grown by 53% to 23 investment funds.
- This demand often reaches our country through investment products belonging to international entities, which usually have more developed ranges of HSA investment products. It is clear that this trend is leading national entities to expand the offer of this type of product, with the aim of satisfying the demand of their clients.
Cover image: Claudio Schwarz