Report: responsible investment ‘increasingly important feature’ across EU

The European Union should support self-regulatory initiatives on transparency and highlight the benefits of responsible investment, the European Fund and Asset Management Association (EFAMA) has said.

In its 2014 responsible investment report, the organisation said it recognises the need for the investment management industry to play its part in rebuilding investor confidence after the financial crisis.

The report notes that the responsible investment market in Europe is “booming” and points to figures from the European Sustainable Investment Forum (Eurosif). At the end of 2011, the responsible investment market exceeded €6 trillion (£5 trillion), up from the €5 trillion (£4 trillion) at the end of 2009.

EFAMA, which represents around €15 trillion (£12.5 trillion) in assets under management through its members, added that this highlighted that responsible investment was becoming an “increasingly important feature” of the European investment management industry.

One of the issues highlighted by the organisation was the need for transparency so that investors could distinguish between different responsible investment offerings and make an informed decision.

The report said, “EFAMA believes that if an investment manager provides responsible investment products, it should commit to an adequate amount of transparency regarding its processes so that the end investors, its client or beneficiaries, are able to evaluate and compare how it meets the demand for responsible investors.”

The association called on the EU to recognise responsible investment as an incentive that can help encourage corporate responsibility. The report also suggested that the EU should endorse responsible investing in the management of EU state-owned or controlled funds and investment schemes and support self-regulatory initiatives on transparency.

As responsible investment encompasses a wide range of approaches ranging from negative screening and exclusion of companies to an approach where environmental, social and governance (ESG) factors are considered, there is no standardisation across the market. EFAMA added that it considered this to be an issue but noted it was not easily resolved.

Further reading:

Private equity industry adds weight behind responsible investment

Responsible investment is ‘an inevitable movement in society’

Sustainability yearbook highlight responsible investment opportunities

Private equity firms focusing on ESG risks instead of opportunities, PwC study

PRI study: ESG factors influence countries’ economic development and sovereign debt