Between 2016 and 2017, European green funds increased 49% to €32.2 billion, compared to €22 billion last year. This figure is very impressive, and this is the key finding that has emerged from Novethic's latest study, "2018 European Green Fund Market". The year-on-year increase is four times higher than the European market, which climbed 12%.
Jade Dusser, Sustainable Finance Market Research Manager at Novethic and author of the study, notes that it is not so much the number of funds that increased - going from 164 to 176 - but the result of an excellent inflow rate, "which accounts for 70% of this growth". Of the €10.2 billion increase in green funds, €7.2 billion come from 2017 inflows and €3 billion from fund performance.
A small drop in a large ocean
Anne-Catherine Husson-Traore, CEO of Novethic, explains: "Green finance is on everyone's lips, from central bankers to the European Commission, but its real influence remains modest(...) Green funds’ assets (...) barely exceed €32 billion! In Europe indeed, UCITS funds are worth over €10 trillion. To finance the green transition, this small drop in the ocean will need to create a bigger wave! "
Novethic divided green funds into five broad categories. From the broadest theme to the most specific, the study covers sustainable development, environment, water, climate and renewable energies. Water and environment-themed funds constitute the largest amount of assets, totalling €11.3 billion and € 10.6 billion respectively.
Dusser proposed a sixth category, low carbon funds, “whose strategy is to reduce GHG emissions in their portfolios, by selecting the most committed companies within each activity sector.” Assets totalled only €2.7 billion in 2017, but doubled in one year with performance at 17.6%, well above the 10.6% average.
Europe’s green finance hubs
Geographically, two countries are doing well. Funds managed in France attracted 32% of all assets and 30% for Switzerland, accounting for almost two-thirds of the total market. Leading the way is the Swiss management company, Pictet, with three funds totalling €5.9 billion, followed by BNP Paribas AM (10 funds, totalling €5.2 billion). Most notably, the French attracted €2.2 billion of the €7.2 billion inflow in 2017, putting it in the lead for this indicator.
The study found that "funds managed in France benefit from growing interest. This can be seen as a result of article 173 of the TEE law that has stimulated a demand for products that are able to skew their environmental contribution."
Dominique Blanc, Director of Research at Novethic, added, "In France, some management companies like Mirova or BNP Paribas AM are supported by networks of large banks, where there is evidence of early interest for these funds and an established distribution policy".
Ludovic Dupin, @LudovicDupin