On 19th November 2020, the European Fund and Asset Management Association (EFAMA) has published its first ESG-focused Market Insights “Sustainable investment in the European asset management industry: defining and sizing ESG strategies”.
Highlights include:
- Firm-level ESG selection strategies represented a total of EUR 10.7 trillion or 45% of the total assets under management at the end of 2019 in the countries covered in the report. These strategies include two broad types of ESG selection: exclusions of certain types of investment and systematic and explicit integration of ESG risks and opportunities in the investment decision-making process.
- Exclusions are one of the most basic and common forms of ESG selection strategy – nearly a third of assets covered in the report applied this strategy. ESG integration is the most popular ESG selection strategy, with a little over 37% of total AuM are selected following this approach.
- Investment stewardship and engagement also play a key role in the ESG strategies of many asset managers: EUR 10.2 trillion of assets are subject to ongoing ESG-related engagement or voting policies, accounting for over 43% of total AuM.
- Product-level ESG selection strategies include four different approaches: exclusions, ESG integration, sustainability-themed products and impact investing. ESG integration is the most common selection strategy at the product-level in Europe. In total, EUR 3.9 trillion of assets are managed in this way, accounting for around 16% of total fund and mandate assets.
According to EFAMA, the following actions will play a crucial role in the further development of the European ESG market:
- Narrowing the data gap by ensuring reliable and comparable ESG data reporting by companies in Europe and beyond.
- Increasing transparency through appropriate disclosures by asset managers.