A practitioner guide for asset managers & asset owners to assess clients’ and beneficiaries’ sustainability preferences

An Untapped Multi-Trillion Opportunity for the European Financial Market

In the European Union (EU), households own 35 trillion EUR in financial assets. Around one-third is invested in equity and investment funds, while another is invested in insurance, pensions, and standardised guarantees.

Most of this investment is not aligned with the sustainability motivations and preferences of investing EU citizens. Currently, 60-70% of these EU investors repeatedly state that they want to sustainably invest their money. This gap between the current investment and the desire of EU investors to invest sustainably represents an untapped, multi-trillion EUR opportunity for the European financial market.

Investment managers who recognise this gap and integrate their investors' sustainability preferences into their product offerings will have a significant competitive advantage compared to their peers. However, to fulfil this unsatisfied market demand, new expertise and tools are needed to successfully integrate investors’ preferences into the development and management of new product offerings. 

Financial institutions have a duty to draw out the sustainability preferences of their clients and beneficiaries.
Rob Bauer, Professor of Finance at Maastricht University, School of Business and Economics

Maastricht University's School of Business and Economics and 2DII developed a practitioner guide for asset managers & asset owners to assess clients’ and beneficiaries’ sustainability preferences. Below, we will summarize the context and findings of the paper written by Rob Bauer (SBE) and Nicola Stefan Koch.

However, you can also download their paper directly by clicking the green button!

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The Right Tools for the Job

The research team around Prof. Rob Bauer, including Paul Smeets, Katrin Gödker, and Marco Ceccarelli developed and applied surveys and experiments in 5 different, real-life case studies with each their institutional context.

The primary goal of both the surveys and experiments was to improve the quality of the method to draw out the sustainability preferences of various types of asset holders and beneficiaries. The case studies included the following organisations:

  • Pensioenfonds Detailhandel: A large Dutch pension plan (around 30 billion EUR of assets under management (AUM)) that provides a defined benefit (DB) pension plan to close to one million Dutch beneficiaries in the retail sector.
  • Nationale Nederlanden: An international financial services company with a strong presence in many European countries and Japan (around 140 billion EUR of AUM). The experiment focused on an occupational pension solution (collective defined contribution (DC) pension plan) for small Dutch companies.
  • BeFrank: A financial services company and part of the NN Group (around 7 billion EUR of AUM). The experiment focused on an occupational pension solution (collective defined contribution (DC) pension plan) for larger companies.
  • Universities Superannuation Scheme (USS): The largest private pension plan (hybrid defined benefit (DB) and contribution (DC) in the UK (around 100 billion EUR AUM) and is primarily used by universities and higher education institutions.
  • Meesman Indexbeleggen: A boutique mutual fund that provides Dutch retail investors with an umbrella of index investment vehicles in both equity and fixed-income markets index mutual fund (around 1 billion EUR of AUM).

Checks and Balances

One of the most important findings shows that it is important to have high-quality governance of surveys and experiments place. Concerns arise regarding ethics, GDPR, wrong incentives, and more. For example, financial institutions may construct poor-quality surveys or, even worse, make use of the private investors’ biases to their advantage.

The findings also show that methods in both the domain of surveys and experiments need to be further developed. It might even be good to approach further development in other domains from a more trans-disciplinary approach.

An example of another discipline would be Social Sciences, specifically Political Science: What governance structure would allow investors' arguments and worries to be included in the decision-making process of a financial institution?


About the funder and the project

This project is funded by the EU’s Horizon 2020 research and innovation program under Grant Agreement No 834345. LEVEL EEI aims at making the financial products contributing to energy efficiency and sustainable energy more competitive. This work reflects only the author's view and the funder is not responsible for any use that may be made of the information it contains.

The paper is part of the Retail Investing Research Program at 2DII which is one of the largest publicly funded research projects about the supply, demand, distribution and policy side of the sustainable retail investment market in Europe.