The Novethic survey on Socially Responsible Investment (SRI) is conducted annually and focuses on the view that European institutional investors have on this subject. In 2011, 259 institutions from 11 countries that manage 4.5 trillion euros took part.
The survey in Spain was conducted by Novaster and covers 38 institutions including 20 occupational pension funds, 12 mutual funds, 3 pension management firms and 3 other types of asset management institutions. These entities manage 27 billion euros and 11 of them are bound to the UN agency relating to the Principles for Responsible Investment (UN PRI).
In addition to the global results, in NovaStar we have conducted an analysis of the responses of the Spanish institutions involved and compared them with the overall results. Some of the findings, both pan-European and specific to Spain, are as follows:
- Integrating ESG (environmental, social and corporate governance) criteria into financial management is a concept well understood by European investors overall, although it is closely associated to the exclusion of sectors and issuers.
- The two main factors inciting the application of ESG criteria are still contributing to a more sustainable model and control of long-term risks.
- The extra-financial rating agencies are still the main sources of information.
- The majority of investors are currently developing an ESG integration policy.
- Investment in controversial weapons is today considered to be a reputational risk by about 80% of these investors.
- Integrating ESG aspects is carried out more on managing equity, although progress is being made on other types of assets.
Results of Spanish entities:
- Progress is being made toward implementing more complete and complex forms of SRI (integration, selection) than exclusions.
- The desire to work toward a better world is the wish of the majority of investors and this is not overly linked to risk control or financial results. However, this focus has lowered compared to 2010 and is expected to continue to evolve in this direction as knowledge of the subject increases.
- Overwhelmingly legal or financial problems in implementing SRI policies are not foreseen, in line with the view from the center of continental Europe.
- There is a widespread rejection of activities like manufacturing controversial weapons but there is also a general reluctance toward undesirable practices in the social sphere.
- Express intentions to develop an SRI policy are relatively high, although somewhat lower than their European counterparts, but the degree of fulfilment is much lower.
- Consistently, strategies for implementing this policy are rare, but fairly balanced.
- Still standing out is the absence of shareholder engagement strategies (voting and engagement with companies). This absence is usually associated in the survey to not being bound to the UN PRI or not using the tools and opportunities it provides.
Our experience in providing consulting services in socially responsible investment, focused on pension funds as a major institutional investor, is that in Spain progress in considering and further implementing SRI policies on occupational pension funds is slow but steady, and it is increasingly seen more that risk management should cover the extra-financial as well as, of course, the purely financial aspects. This development can be observed, incidentally, in that more than half the equity of occupational pension funds is, directly or through their manager, bound to UN responsible investment principles, which is in some way becoming the framework for these institutions in our country.
Diego Valero Carreras
Chairman of NOVASTER Actuarios y Consultores
