Nordic Area Leads the Way in SRI Market
Byline: Pirkko Juntunen and Alistair Graham
The past year has seen the socially responsible investment (SRI) market come of age in Europe, with the Nordic countries leading the way, and Germany and France close behind.However, UK institutions, apart from some local authority schemes, have resisted putting their money in the sector for fear it would constrain their returns.
Continental Europe has seen the launch of several products as well as a number of partnerships between fund managers and SRI consultants. Institutions, including the Swedish national pension funds and Dutch giants ABP and PGGM, have allocated assets to funds or adopted an SRI overlay for entire portfolios.
The Nordic countries - Sweden, Norway, Denmark, Finland and Iceland - are blazing the SRI trail, with investors demanding transparency on environmental and ethical issues.
Anders Bladh, managing director of Intervalor, a third-party Nordic marketing company, is positive about this year being better than 2002.
"We will definitely see an increase in engagement in SRI this year, particularly if performance continues to be good. Many decisions will be ruled by the performance of stock markets but SRI is definitely here to stay," Bladh says.
Last year assets committed to SRI funds in Sweden increased tenfold to more than E6bn ($6bn), representing pledges from public funds, trade unions and foundations to invest 10% of funds into the asset class, according to Caring Company Etikanalytikerna, the Swedish ethical research firm.
Scottish Widows Investment Partnership (Swip), the investment house owned by Lloyds TSB, the UK bank, won four SRI mandates in Sweden last year, making it one of the big success stories. Swip has adopted an SRI strategy pioneered by A-P Fonden 7, one of Sweden's national pension funds.
The ethical criteria used by A-P Fonden 7 is based on ratified United Nations conventions, including the Human Rights one, which ban investment in companies such as weapons manufacturers. A-P Fonden 7 uses Caring Company Etikanalytikerna for its screening process.
Swip's wins include the pension fund of the Swedish Association of Local Authorities, the city of Vasteras, the Swedish Foundation for Strategic Research and Sparinstitutens Pensionskassa.
Folksam, a Swedish asset manager and pensions provider with assets totalling Skr110bn ([euro]12.1bn), has put an SRI criteria on its entire portfolio.
The company is also co-operating with Caring Company Etikanalytikerna for screening. Folksam excludes only tobacco, a policy that has existed for some time. Instead it uses a positive screen where firms ahead of the competition in terms of social responsibility and environment are favoured. Human rights is another issue which Folksam promotes, but it believes that the best results can be achieved through corporate governance rather than exclusion.
In Norway, Den norske Bank (DnB), the Norwegian financial services group that bought Sweden's Skandia Asset Management, has teamed up with Dresdner RCM Global Investors to develop its ethical business.
DnB's ethical global equity funds will have access to Dresdner's grassroots research concept, a global reporting network. Dresdner RCM also works with the United Nations Association Trust. DnB says this gives credibility by avoiding subjective selection criteria.
Elsewhere in Europe ABF Asset Management, the Paris-based subsidiary of Credit Lyonnais Asset Management, and Pictet Funds, the mutual fund arm of Pictet, offer new SRI funds. …