Luxembourg to develop SRI
Responsible investing can make a difference: that Luxembourg is determined to turn this statement from vision into reality was clear at yesterday’s Responsible Investing conference organised by the Association of the Luxembourg Fund Industry (ALFI). Foreign delegates experienced a vignette on the Luxembourg way of doing business when Finance Minister Luc Frieden, speaking at the end of the morning, said he would set up – and chair – a Round Table on social entrepreneurship. This group will examine whether legal or regulatory initiatives are required to help socially oriented businesses grow and work on a better definition of the sector.
Definitions are also a preoccupation in the wider field of sustainable and socially responsible investing. “The European Responsible Investing Fund Survey” commissioned by ALFI and carried out by KPMG identified no less than 1,236 investment funds marketing themselves as socially responsible, with assets under management totalling EUR 129.49 billion.
More than half of the total number of funds identified – 704 – are cross-sector “ESG” (Environment, Social and Governance) funds that invest in multiple sectors. Most of these funds use either negative screening (simple exclusion strategies, such as tobacco or arms) or positive screening (e.g. “best in class” strategies and cross-sector funds with an engagement policy) to select their investments.
When it comes to particular investment sectors, asset managers tend to favour environmental themes. Climate change/renewable energies, environmental/ecological, carbon and water are the four largest thematic sub-categories in terms of assets under management, totalling EUR 30.49 billion. The 42 funds identified as Sharia-compliant funds, account for EUR 0.94 billion.
Social Impact funds, which deliver a direct, measurable impact on one or more projects, are emerging from the bottom of the list. However, the concept of social impact is still blurred and overlaps with other themes.
The boundary between microfinance funds and social impact funds is grey and open to debate. Lack of reliable and accurate data still constitutes a barrier to evaluate the real size and potential of this new market, the report says.
France and Luxembourg are the most important domiciles for European SRI funds. Together, these countries occupy a 45% market share.
The conference brought together 220 professionals from 14 countries to discuss themes all the way across the responsible investment spectrum, ending with a presentation of the draft European Social Entrepreneurship fund delivered by Sophie Auconie, a member of the European Parliament.