A recent market study conducted by the association Swiss Sustainable Finance (SSF) has found that sustainable investments have continued to enjoy double-digit growth among asset managers and asset owners in Switzerland in 2020.
The volume of sustainable investment funds enjoyed a significant rise of 48% and for the first time these now account for more than half the overall Swiss fund market, with a share of 52%, compared to 38% in 2019, the study revealed.
Among the approaches, ESG integration ranked first, applied to assets worth CHF1.07trn (€978bn), or 71% of the assets, followed by ESG engagement, which has enjoyed the second highest growth rate and improved its ranking to second place, up from third last year. The category of impact investing still enjoys the highest growth rate of all sustainable investment approaches, at 70%.
“We know through our conversations that players no longer look at impact investing as purely a developing market and private market approach, but it is also being applied to the listed space across all regions,” said Kelly Hess, director projects at SSF, during a conference call this morning introducing the fourth edition of the Swiss Sustainable Investing Market Study.
Impact investing covers CHF85.6bn (€78.3bn) of sustainable assets, according to the study. The volume of sustainable investments rose overall in the Swiss market by 31% year-on-year in 2020 to CHF1.52trn.
Institutional investors account for 72% of the volume of sustainable invested assets, according to the report. Insurance companies are the largest contributor in terms of sustainable assets (51%), followed by public pension funds (20%) and corporate/occupational pension funds with 18%.
Sustainable investment funds recorded the highest growth rate with 48%, while sustainable mandates increased by 29% and sustainable assets of asset owners by 15%.
The volume of assets managed sustainably in investment funds increased from CHF470.7m in 2019 to CHF694.5m last year, representing 52% of the overall Swiss fund market, compared with 38% in 2019, the study said.
“The two main contributors to the growth are first of all a wider adoption of ESG approaches to existing assets of participating organisations, and secondly a quite substantial positive market performance in 2020, which accounted for about one third of the observed growth,” Hess said.
The distribution of the allocation of sustainable investments showed an increase for all asset classes.
Equity ranked first among asset classes for sustainable investments with 32%, ahead of corporate bonds (24%), real estate (14%), sovereign bonds (13%), private equity (4%) monetary/deposits (3%) private debt (3%), infrastructure (1%), hedge funds (1%), supranational bonds (1%) and other forms of investments 4%, the study said.
Equities recorded the highest increase in absolute terms for sustainable investments, from CHF311.9bn in 2019 to CHF437.9bn in 2020, followed by corporate bonds with CHF326.2bn and real estate with CHF189.2bn allocated sustainably.
The study also revealed that asset managers turned to third party certified labels for 32% of their sustainable investment volume last year, compared with 6% in 2019.
One third of reported investment funds and mandates were marketed as sustainable, up from one quarter last year.
“There seems to be a trend towards more transparency and credibility,” Hess said.
Asked if Swiss pension funds would likely be required to provide transparency on ESG, Sabine Döbeli, chief executive officer at SSF said: “Yes, it is likely that it will become compulsory [also] at the level of pension funds because I see how the topic has developed over the past two years, and I also see the public pressure to provide more transparency […] this will be a trend.”
SSF worked alongside the Center for Sustainable Finance and Private Wealth at the University of Zurich to conduct the study based on data from asset owners, asset managers and banks domiciled in, or with operations in Switzerland.