Spain's SRI market set to receive regulatory boost

Eugenia Jiménez
clock • 5 min read

Sustainable investing increasingly becomes mainstream in Spain as the European Union draws up regulatory taxonomy on green finance as part of its efforts to channel private investments into clean technologies.

The overall value of assets managed against socially responsible investment principles in Spain amounted to €210.64bn at the end of 2018, a figure that represents a 13.5% year-on-year increased.

This data comes from the 2019 annual report on SRI investing in Spain, carried out by the Spanish Sustainable Investment Forum (Spainsif), and presented at the Forum's tenth annual meeting in Madrid last month.

SRI and ESG investing continues growing globally and in Spain, due to the firm bet of financial markets on sustainability (...)," Spainsif's president Joaquín Garralda

The Spainsif study also found that of that €210.64bn of assets, €191.28bn was looked after by national asset management firms while €19.36bn was managed by global managers operating in the country.  

Another finding of the report is that despite retail SRI investing grew from 7% in December 2017 to 15% one year later, the figure still represents just 15% of total value. 

And according to Spainsif, this annual increase could also be partly explained by the addition of global asset managers to the survey, a novelty incorporated in this year's study. 

The report gathered responses from asset management firms - both national and global ones operating in the country - collectively managing €378.22bn in assets, which represents 67% of the total volume of assets managed in the country.

It was elaborated following the same methodology used by the European Sustainable Investment Forum (Eurosif) and the Global Sustainable Investment Allianz (GSIA) in the collection and analysis of SRI data.

Speaking at the event, which received some 300 professionals from the financial world, Spainsif's president Joaquín Garralda, said: "SRI and ESG investing continues growing globally and in Spain, due to the firm bet of financial markets on sustainability, which has been driven by the Paris Agreement's environmental and social commitments; the EU 2030 Agenda; and the ongoing development of the European Commission's Action Plan on Sustainable Finance."

A UNIVERSAL AND COMMON DEFINITION

Regulation and standardisation seem to be key to overcome greenwashing and scepticism, so believes Helena Viñes, deputy global head of sustainability & head of research and policy at BNP Paribas Asset Management, who is also a member of the European Commission's Technical Expert Group on Sustainable Finance (TEG), working actively on the ongoing European Union Taxonomy.

The wide variety of classifications and interpretations of what is green both in the public and private spheres, provokes many, particularly in the retail market, to remain sceptical about what lies beneath financial products labelled green.

The EU Taxonomy is a draft list of economic activities that is currently being drawn up at European level in order to channel private investments into clean technologies.

Annual investments in the range of €175 to €290bn a year will be needed to move to a zero-carbon economy by 2050, according to the EU's Technical Expert Group on Sustainable Finance, appointed by the European Commission last year to produce a first draft of the Taxonomy.

The EU Taxonomy aims to define and set up a common understanding of which are the economic activities that can be genuinely considered environmentally sustainable in order to channel more capital into sustainable businesses and prevent greenwashing.

For an activity to be eligible, it needs to prove it makes a substantial contribution to one of the EU's six environmental objectives but without having a detrimental impact on any of the other five. The six environmental objectives or Sustainable Development Goals (SDGs) of the EU are:climate change mitigation; climate change adaptation; water and marine resources; circular economy; waste prevention and recycling; and pollution and healthy ecosystems.

The TEG takes guidance from existing EU legislation, policies and goals. It bases the development of the taxonomy on the NACE codes, which is the industry classification system. The TEG defines thresholds for the eligibility of activities according to metrics such as carbon intensity (gCO2/kWh) based on the best science available, with reference to existing recognised standards, balancing this against practical needs.

Helena Viñes, said: "Taxonomy also aims to help investors to make informed decisions but also because the climate change and environmental emergency we are facing.

"The Taxonomy does not evaluate companies, it just identity which economic activities can be considered green and under which circumstances.

"The Taxonomy is at its starting point and now the team working on it leaves its mandate in December. There will be a team taking on this responsibility. The goal is not just to finish this alphabet, is also to make it more interactive."

SteffenHörter, global responsible of ESG at Allianz Global Investors and also member of the TEG, who also spoke at the event, added: "The job of the EU's Technical Expert Group on Sustainable Finance (TEG) cannot be overlooked and the financial community is called to provide a constructive response on how to implement the new regulation in the most efficient way."

ASSET MANAGERS & REGULATION

Gonzalo Rengifo, general director of Pictet AM in Iberia and Latin America said that with regards to SRI and ESG investing, the asset management industry is well ahead of regulation. He added: "While the European Union continues in talks about principles and goals to mitigate climate change risks, global asset managers have already made some progress on sustainability."

Rengifo also explained how Pictet makes its investment decision taking into account ESG and SRI principles when looking at an investment universe of 40,000 companies.

"There are already good practices taking place in the market, so we do ask the regulators to not make us feel overwhelmed with regulation.

 "We need legislation to adapt to the industry and not the other way around."

Rengifo concluded by outlining his company's rejection to sustainable indexes, since they believe these normally define a sub-universe whose companies are not necessarily the most sustainable ones. 

Jose Carlos Vizárraga, general director at Ibercaja Pensión EGFP focused on the sustainable investing approach taken by pension funds' providers in Spain. According to him, the Spanish pension industry has been taking into account SRI principles for a while now due to demands from trade unions.

Vizárraga said: "Although sustainable finances are increasingly becoming mainstream in the sector, we still need to work a lot on them. But we eye them as a clear opportunity." 

Eugenia Jiménez
Author spotlight

Eugenia Jiménez

Eugenia Jiménez speaks Spanish and is Iberia Correspondent for Investment Europe covering Spain & Portugal, as well as Italy.