There is an increasing demand of products of sustainable responsible investing (RSI), especially among some types of clients. At the beginning of RSI, the profile of the client used to be institutional.
Nowadays, the institutional investment remains the same, but the retail investor takes an increasing interest in these types of products, especially in some markets. Concerning Spain, there is a considerable potential to make the market grow to reach the same level of the more developed European markets.
Likewise, there are some sectors of the society really interested in RSI. Several recent studies show a bias determined by two factors: gender and age. This way, women and millennials are the collectives leading the change, being interested in this type of products the most.
What is boosting the unstoppable development of the RSI?
For many people, it is becoming apparent that their investments are aligned with their values and way of thinking. These values are in the middle of a process of transformation in a society that currently faces important global challenges, most of them linked to the concept of sustainability. For example, challenges such as the climate change, which already shows its effects, or the Sustainable Development Goals (SDGs), increasingly present in our daily life as a consequence of the media focusing on poverty, migration, inequality, etc. In this way, SRI turns into a perfect way to offer products adapted to the current challenges of the society.
There are many initiatives both at national and international level such as the Principles of Responsible Investment of UN and forums such as Eurosif in Europe or Spainsif in Spain
In addition, there are several keys that will go on boosting the development of responsible sustainable investing. On the one hand, the fulfillment of sustainable goals at a global level, which will require a considerable economic effort. For example, it is estimated that an annual investment of 180 billion euros will be neededto achieve the goals related with climate change in the EU. In order to face the payment of such investments, the action of the public sector will be not enough, so the private sector, especially the financial field, will be key in the movement of capital focused on sustainable development.
On the other hand, there is important momentum of the regulatory initiatives, especially in Europe through the Sustainable Financing Plan of the European Commission. This is a vital program in the creation and establishment of a common language (taxonomy of green activities), the development of standards and labels of sustainable financial products and the boost of the transparency in sustainability.
Likewise, there are many initiatives both at national and international level such as the Principles of Responsible Investment of UN and forums such as Eurosif in Europe or Spainsif in Spain, that foster the consideration of environmental, social and good government in the financial sector, the knowledge of responsible sustainable investing and the dialogue with groups of interest to facilitate the development of the RSI.
What are the obstacles the RSI faces?
Despite the obvious tendency of growth, the development of the RSI isn’t free of difficulties. Firstly, there are not homogeneous standards, definitions and criteria on RSI and its application. In spite of the significant progress, concepts of responsible sustainable investment are not clear and the methodologies and structures of governance of the RSI are still being defined.
Secondly, it is necessary to progress with the transparency of the extra-financial information reporting through the development of standards and rules. Though it is clear that the information about financial results of a company is really important, this vision alone is less and less complete. There is a clear recognition that an important percentage of the assets of a company is intangible and that it is not reflected in the balance.
Precisely most of these intangible assets (for example reputation, human capital, customer loyalty…) are included in the ESG (Environmental, Social and Governance) category. So, in order to get a full vision of the risks and call the shots on investment, it is necessary that the companies improve the reporting of relevant, reliable, comparable information on ASG.
Finally, it must take into account that the increasing demand of RSI products will require a parallel response from the managing bodies, which must carry out a process of transformation to strengthen their structures, equipment and RSI analysis processes. It must improve the process of reporting as they need to be more transparent onthe application of extra-financial criteria before taking investing decisions, giving to the client quality information. Taking into account all these factors, such transformation will require an effort in ASG training and education both for clients and employees in every area, from the product design to the sales.
Santander Asset Management is fully aware of the challenges and opportunities with RSI. Therefore, they work to continuously monitor the evolution of the levers that drive it and devote significant efforts to the continuous improvement of their processes. Likewise, it promotes the sustainable focus among all its groups of interest by supporting transparency in the information about its products and processes, as well as the dissemination of knowledge on RSI in different channels and forums.
Santander Asset Management is leader in responsible investment in Spain, monopolizing 66% of the managed assets in Responsible Sustainable Investment (RSI) funds, according to the data published by Inverco last March.