Financial industry overview
The Austrian banking and asset management industry is both strongly diversified and well established, with public and cooperative banks playing a particularly important role. The cooperative ‘Sparkassen’ is organised collaboratively and operates under the serving of the principle of common public interest. Other cooperative banks are the ‘Volksbanken’ and the ‘Raiffeisenbanken’. Austria possesses one of the most dense bank nets in Europe.
In Austria, there are around 24 investment companies, offering 2.067 Funds with a volume of €162.7 billion. Of these, 1.235 are funds and 832 are discretionary mandates. The largest group are mixed funds (1.095), followed by bond funds (528) and equity funds (343).
Characteristics of the SRI market
The Austrian SRI market continued to grow sustainably over the last two years as the overall market share grew by 6.3 %, but it has to be noted that asset overlays are not counted. The main drivers for the growth of SRI are demand from institutional investors, external pressure (NGOs, media), and fiduciary duty. The main institutional investors are the severance pay funds (betriebliche Vorsorgekassen).
SRI market and strategy overview
In this year’s review, the total figure for Exclusions is €10 billion. This figure includes criteria especially applied to funds and segregated mandates (product specific). These represent the majority and total €10 billion. In Austria, investment in cluster munitions and anti-personnel mines and speculation involving foodstuffs are criteria used as asset overlays exclusion.
The main sustainable investment approach in Austria is Exclusion. Nearly 100% of all funds, mandates and self-managed assets in Austria apply Exclusion criteria. There is an almost equal level of preference for the Exclusion criteria with no real favourite, which is a rather unusual trend.
Best-in-Class and Norms-based screening, follow with a CAGR of 33% and 20% respectively, very much in line with the previous year, with AuM at €7,92 billion for the latter. Austrian asset managers most commonly use: ILO conventions and UN Global Compact principles.
In the case of Engagement and Voting, this year we have a compound annual growth rate (CAGR) of 36%, making this strategy the fourth most popular in the country.
Asset managers in Austria normally combine different strategies.
The Austrian Ecolabel (österreichische Umweltzeichen), which is granted by the Austrian Ministry of Environment, was established in 2004 and is the oldest Label for SRI-Funds in Europe. The Austrian “Umweltzeichen” is a state-run quality label for thematic funds and SRI funds as well as certificates. Over the years, demand has increased and there are around 70 funds certified at present.
The launch of the new quality Label in 2015, by FNG for sustainable mutual funds and audited by Novethic, has been the most relevant innovation on the market.
The ÖGUT Sustainability Certification for severance pay funds (Betriebliche Vorsorgekassen) has evolved since it was first established in 2004 and now covers 100% of the local severance pay funds market.
Austria has not seen any remarkable legal changes concerning SRI or CSR since the last edition of the SRI Study. Nevertheless, like other EU member states, the country will have to implement the reporting guidelines under the Non-financial directive of the European Commission, due at the end of the year. Specific disclosure requirements for pension funds were already introduced in 2005. Since then, pension funds have been required to report on ESG issues, provided they are implementing an ESG approach.
Asset allocation shows that bonds are still the predominant asset class with a market share of 79% in 2015. Equity had a market share of almost 20% in 2015 and other asset classes had hardly any significance in Austria, only about 2%.
The SRI asset managers believe that the market development will be mainly driven by demand of institutional investors. External pressure, e.g. from NGOs, trade unions or the media, is considered the second most important key driver, followed by fiduciary duty, the demand of retail investors and international initiatives like PRI. Sustainable investments have grown substantially within the last two years in Austria and reached double-digit growth.