Europe has twice as many assets in sustainable investments as the United States according to Morningstar, the fund research provider.
San Lie, director of manager research, Benelux with Morningstar’s EMEA fund research team said in the firm’s latest bi-monthly magazine that $13.6 trillion was invested in sustainable assets in Europe compared to $6.6 trillion in the US. Lie said that a total of $21.4 trillion was invested globally in ESG (environmental, social and governance) assets in 2014, 60% more than in 2012.
As a result 30.3% of global professionally managed assets were invested in ESG assets in 2014, up from 21.5% in 2012. In Europe 58.8% of investments were sustainable compared to 17.9% in the US.
Lie said in the report: “One of the reasons Europe is leading the way is the fact that European institutional investors see sustainable investing as part of their fiduciary responsibility.”
For example ABP, the €356bn Dutch pension fund, changed its investment policy last October to raise standards for responsible investments. As part of the new policy ABP will cut 25% of CO2-related investments from the overall share portfolio by 2020 while doubling clean energy investments from €29bn to €58bn. In 2014 the CO2 footprint of ABP’s listed investments dropped by 10%.
Corien Wortmann-Kool, chairman of ABP, said in a statement: “We are convinced that responsible investment will generate the most value in the long-term. Decisions regarding whether an investment is responsible and sustainable will carry a lot more weight and the threshold for inclusion in our portfolio will be raised.”
ABP said it has we have achieved an average return of over 7% on an annual basis over the past 20 years.
Lie added: “What the United States and European countries have in common, however, is weakness in the retail ESG market. This may be due to the lack of clear definitions, or the view that ESG comes with a performance penalty.”
At the COP21 Paris Climate Change Conference last month the Financial Stability Board announced it is forming a task force on climate-related financial disclosures to develop voluntary, consistent disclosures that companies can use to provide information to lenders, insurers, investors and other stakeholders.
Mark Carney, chair of the FSB, said in a statement: “Access to high quality financial information will allow market participants and policymakers to understand and better manage those risks, which are likely to grow with time.”
The task force, chaired by Michael Bloomberg, will initially consist of about 10 individuals who will determine the scope and high-level objectives by the end of March 2016. It will subsequently expand to 30 individuals who will make specific recommendations for voluntary disclosure principles and best practices by the end of this year.
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