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Analysis of the Socially Responsible Investing Funds Market

  • June 2013
  • -
  • Frost & Sullivan
  • -
  • 82 pages


Table of Contents

Interesting Opportunities for Long Term Investors

Frost & Sullivan's business and financial services group serves clients around the world in all aspects of financial analysis, market research, and monitoring, due diligence, idea generation, opportunity analysis, investment valuation, and other proprietary research. A key aspect of this offering is the Financial Benchmarking and Analysis (FBA) in the asset management space. This FBA is on the analysis of the socially responsible investing(SRI) market in the world. It primarily focuses on the SRI markets in Europe, North America, and Asia Pacific regions. Market drivers, restraints, and investment themes are also covered as part of this research service. SRI in Europe is extensively covered in this study.

Executive Summary

• The European Socially Responsible Investing Funds Funds (SRI) market is expected to grow at a compound annual growth rate of X percent from 2011 to 2017.
• Increase in demand from high net worth individuals, institutional, and retail investors is expected to drive the market growth.
• Favorable legislation and new product offering are expected to attract investments into the SRI market around the world.
• Retail SRI funds are expected to see higher fund inflow as retail investors look for investment avenues during economic slowdown.
• Greater investor education, standardization and simplification of product literature can help in increasing the demand for SRI products.

CEO’s Perspective

1. Increase in demand for retail funds is likely to be witnessed in the nextXXto XXyears (2012–2015).
2. Favorable legislation and media advocacy is expected to create investor awareness and increase demand for SRI products.
3. Increase in SRI products in investor portfolio is likely as demand from high net worth and institutional investors is expected to increase.
4. There is a need for greater integration of socially responsible investing with mainstream investing.
5. New product and fund style is expected to increase demand for SRI products.


The research service covers European SRI funds market and for the purpose of comparison a note on the North American and Asia-Pacific SRI markets are furnished. SRI is investing in companies, funds or other assets that meet certain criteria in social welfare, environment, governance, and other global issues. SRI, also referred to as value-based or ethical investing, considers both the positive and negative impacts of the environment, social and governance (ESG) issues in the context of security analysis and investment management. This study mainly deals with SRI retail funds. The term ‘SRI funds’ is synonymously used with ‘SRI retail funds’ across the study.

SRI Strategies
• Negative Screening
• Positive Screening
• Community Investment
• Socially Responsible Lending
• ESG integration
• Proxy Voting and Engagement

Core SRI
Negative Screening: This is a selection criteria used to exclude companies that meet the exclusion criteria for investment. The criteria can range from specific sectors such as weapons, alcohol, tobacco, and gambling to norm-based screening focused on companies’ compliance to international standards and conventions. Negative screening creates sector bias.
Positive Screening: Positive Screening can be further classified as best-in-class or pioneer screening. Best-in-class approach includes investments in leading companies in accordance to the investment criteria in each sector or industry included in the portfolio. Pioneer screening includes investments focused on certain themes such as water or renewable energy.
Community Investing: This refers to investments in community development or initiatives that contribute to the growth and well-being of particular communities.
Social Responsible Lending: This involves lending to an individual, company or community that qualifies for the screening criteria.

Broad SRI
ESG Integration: This is the integration of environmental, social, and governance criteria into traditional financial management. SRI is used as a key input in developing the investment strategy. To generate alpha or excess returns the investment manager maps the key SRI risks and opportunities and integrates them into company valuation.
Proxy Voting and Engagement: This is the involvement of shareholders to bring positive changes in ESG issues in a company. It includes dialogue with management of companies on areas of concern followed by eventually filing, co-filing, and voting on shareholder resolutions.

Key Questions This Study Will Answer

• Is the market growing, how long will it continue to grow, and at what rate?
• How is SRI poised in various countries in the world?
• Who are the major SRI fund providers in various countries in the world?
• What are the investment themes in the SRI market?
• What is the evolution of net assets in the European SRI market and what factors are expected to influence its growth in the future?

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