Socially responsible investing (SRI) or ethical funds have never been so popular, according to a new report* from independent market analyst Datamonitor. The European ethical wealth management market is now worth EUR1.033tn**. The UK is the biggest market in Europe for such products, and ethical wealth management looks set to grow in popularity. Katie Langridge, Financial Services Analyst at Datamonitor and author of the report comments, “Ethical wealth management is not just a fashionable fad, and impressive returns suggest it will become a significant feature of the wealth management landscape in Europe.”
Ethical wealth management is not new, but over the past five years, wealth managers have noted increasing levels of client interest in investment or banking propositions that are socially responsible, or that offer sustainable investing. “Managing wealth in an ethical way has always been popular with certain niche client groups, but general public awareness of global environmental and social problems has increased, thanks to high profile charity campaigns and increasing activism,” comments Langridge.
Eurosif estimates that the European ethical wealth management market is now worth EUR1.138 trillion, and is growing above the rate of the overall European equity markets. The vast majority of the total value of the European ethical wealth management market is being generated by so-called “broad” SRI***, which grew by 36% above the Morgan Stanley Capital International Indices Europe between 2003 and the end of 2005. The total SRI market in Europe is currently dominated by the UK, which accounted for 71.3% of the total market at the end of 2005. The size of the UK’s lead in SRI compared with other European markets is due to the size of the broad SRI market in the UK, however. Core SRI in the UK is worth EUR30.5bn, while the broad SRI market is worth EUR781bn.
As the ethical lifestyle becomes increasingly fashionable, many leading financial firms are creating and developing a range of ethical, or socially responsible, products for clients. This extends beyond wealth management into areas such as mortgages and pensions, and indeed pensions companies are some of the institutions most likely to invest ethically.
Due to the strong returns offered by ethical funds, particularly in the longer term, and the increasing inclusion of ethical factors in standard financial management portfolios, Datamonitor believes that ethical wealth management is set to make a long term impact on the industry. Leading ethical banking providers with wealth offerings covering a wide range of product areas, and with a well-publicised ethical stance, such as the Co-Operative bank, stand to gain tremendously from the ongoing move towards this form of wealth management.
