Sustainable and responsible investments were for too long considered a niche pursuit or a utopian ideal. Now, however, things have changed. This is demonstrated by the latest report from Eurosif, the European Forum for Sustainable and Responsible Investment, presented on Tuesday 15 November at Montecitorio, at the opening event of the SRI Week 2016.

To produce the study, Eurosif consulted 278 industry operators from across Europe, who collectively manage more than €15 trillion. The results speak for themselves: the sustainable and responsible investment market in Europe grew by as much as 25 per cent between 2013 and 2015. "At European level we are in a particularly favourable moment. This is demonstrated by the policies adopted by Juncker, the laws and consultations on sustainable investment, on non-financial reporting and so on. In our study, it is no coincidence that we highlighted the strong relationship between policy and the growth of sustainable investments, in order to show the political world just how great its influence is," commented Flavia Micilotta, Executive Director of Eurosif.

What is even more interesting is that sustainable investments are no longer the exclusive domain of institutional investors (that is, banks, insurance companies and financial intermediaries). The share of retail investors (that is, private individuals) has in fact risen from 3.40 per cent in 2013 to 22 per cent, "a symptom of the receptiveness of certain investors who, more than others, have sought to understand the importance of ESG criteria for their investments," Flavia Micilotta explained to LifeGate.

Sustainable investments, it starts with exclusions

Sustainable investments are not all alike, but can follow as many as seven different strategies. All of them have seen steady growth over the past two years, albeit with notable differences from case to case. The dominant approach in Europe is that of exclusions, the oldest one. Those who choose this path rule out from the universe of their possible investments any companies operating in sectors that are inconsistent with their values (tobacco, weapons, pornography, gambling, etc.). In terms of capital invested in Europe, exclusions broke through the €10 trillion barrier in 2015, an increase of 48 per cent compared with 2013. "It comes as no surprise," remarks Flavia Micilotta, "given the proliferation of entities (pension funds in particular) that in recent years have chosen to divest their capital from coal and oil." This market is worth more than €2,500 billion in Switzerland alone, followed by the United Kingdom at just under €2,000 billion (with an encouraging +99 per cent in just two years).

How much are investments in renewables and clean energy worth

Over the past two years, there has been very promising growth in what are known as thematic investments. The category encompasses all capital invested directly in areas linked to sustainability: energy efficiency, renewable energy, low-impact transport, waste management and so on. This is a far more selective and complex approach than that of exclusions, which explains why volumes are still considerably smaller. Growth, however, has been steady and sustained: in 2009, thematic investments in Europe stood at €25 billion; by 2013 they had reached just under €59 billion, and in 2015 they experienced a genuine boom, reaching €145 billion (+146 per cent). The most advanced countries are France (more than €43 billion) and the Netherlands (more than €37 billion).

Impact investing takes giant strides

But the fastest growth belongs to impact investing, or impact finance. With this sustainable investment policy, companies, organisations and funds set themselves two objectives: a financial return, as with any conventional investment, and a positive, concrete and measurable impact on society and the environment. This is a relatively new reality that is experiencing a genuine explosion. In 2011, Europe stood at €8.75 billion; in 2013 at €20 billion; and in 2015 at more than €98 billion, an impressive +385 per cent in just two years. These investments are almost entirely monopolised by the Netherlands (more than €40 billion) and Denmark (more than €30 billion), but in the coming years interesting figures can be expected from other European countries too.

The advance of green bonds

The Eurosif report on sustainable investments could not overlook green bonds — that is, bonds issued to finance projects linked to tackling climate change. In 2015, green bonds worth $40 billion were issued worldwide, a figure that will probably be "doubled" during the course of this year, given that by 9 August new issuances had already reached $44 billion.

Precisely because it is rising so rapidly, Eurosif notes, this sector feels a strong need for clarity. Investors are increasingly hungry for precise information on the projects into which bond proceeds are invested, so they can understand who they can truly trust. "It is important to follow certain characteristics and rules if green bonds are to represent a genuine turning point and to ensure a good level of fair play. In an industry where definitions sometimes remain up in the air, this is not easy. The Commission, as an impartial body, may decide to step in to provide greater clarity, but at the same time it may perhaps prefer to let the market decide. There are certainly pros and cons to each of these options," comments Flavia Micilotta.

To date the main self-regulatory initiatives are two, Green Bond Principles and Climate Bond Initiative, and both are adhered to on a voluntary basis. At the same time, a growing number of companies are turning to an external audit firm to ensure that the projects financed through green bonds are genuinely "green".

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