Lessons learned from the financial crisis have led to a considerable increase in socially responsible investing (SRI) according to a new report.
The European SRI Study, conducted by pan European think tank, Eurosif found SRI investments have almost doubled since 2007. The survey indicates funds under management rose to €5 trillion from €2.7 trillion - a growth of almost 87%.
According to the survey, SRI has shown ‘remarkable resilience’ throughout the financial crisis. Indeed any effects, it suggested, have been positive.
"Undoubtedly, the 2008 global financial crisis has impacted the SRI industry, but overall the impacts have been more positive than negative," explained the report. "Survey respondents said that the financial crisis has made them more aware of the need to integrate ESG risks; from a demand perspective, the increase of more transparent products has correlated well with the SRI philosophy."
This significant rise is due, suggests the report, to an increase in emphasis on SRI criteria such as climate change among asset owners.
At the same time, SRI is undergoing ‘a transformative phase’ increasingly diversifying into new areas. What was once an equities driven sector is now moving into other assets, particularly bonds.
At the end of 2009, bonds made up 53% of SRI funds under management, up from 39% in 2008. In addition, microfinance attracted increased attention due to its long term perspective and concentration on ESG issues. The study expects the alternatives sector to grow considerably as demand creates supply.
Going forward the report suggested SRI is in "a remarkable place". Demand from institutional and retail investors will drive increasing innovation leading to new products and services.
Even so, many challenges remain.
Segmenting and defining SRI will be a major issue in removing the barriers to investing and helping investors in their decision marking process. Equally, the sector must beware of dilution, as managers cherry pick certain categories, such as climate change, for portfolios.
Addressing these issues will be crucial if growth is to continue into the future.