Sustainable investments have long since had to tackle its tree-hugging reputation, but in recent years the demand for sustainable investment products has taken flight.
What are sustainable investments?
The concept of ‘sustainable investments’ has evolved over time. At first, sustainable investors kept away from certain kinds of companies, such as weapon manufacturers and oil producers. This evolved towards a reversed selection based on positive criteria. The emphasis is now put on companies who deliberately focus on their environmental and social policies and that encourage an active dialogue between company and shareholder.
The most recent figures regarding sustainable investments date from 2014. Then, people in Belgium invested for a record amount of 11.4 billion euros in sustainable products. This was a rise of almost 49% compared to 2013. 8% of the total fund market in Belgium was then situated in sustainable investments. There are two main reasons to explain this boost.
Firstly, the awareness regarding sustainable investments has increased. The financial market is mainly driven by supply. If you don’t know anything about its existence, you won’t buy it. Various marketing campaigns launched by banks have served their purpose of informing people of the existence of sustainable investment products.
Also, sustainable investment products are regarding profitability no less lucrative that traditional investment products. This probably contributes the most to the increasing popularity of sustainable investments. Investors are first and foremost looking for security and high returns, which the traditional products often fail to offer.
How does this translate to the banks? Belfius reports an increased interest with private banking customers. Figures from BNP ParisBas Fortis show that half of the customers know the option of sustainable investments exists and 41% deliberately chooses these kinds of investments. Triodos, too, indicates that interestedness has risen significantly. “Our first client brought 1 million euros in trust. On June 30th, 2016 we had 327 clients in trust and a total of 311 million euros as assets under management”, spokeswoman Lieve Schreurs says.
Sustainable investments remain a niche, but it seems a break in trend has finally been triggered.
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