In December 2020, five ESG funds were registered in Portugal, which together managed 303 million euros subscribers by 20,439 participants. Data from the Portuguese Securities Market Commission (CMVM) reveal an increase in a year of worthless pandemic of assets managed facing 272 million euros registered in 2019. Portugal is still far from European peers in offering this type of products, but the Analysts’ expectation is that the pace of expansion will increase in the near future.
“The interest in Portugal for this type of fund has been growing progressively. We are witnessing a change in the vision and concerns of society and associations in relation to ‘green’ themes, so this trend will certainly increase in the coming years”, says Bruno Marques, associate partner from Deloitte, to Jornal Económico (JE).
Last year, the majority of subscriptions to ESG funds were made by natural persons (99.2%), according to CMVM data, which show that net subscriptions have been shown in the last four years, although 2020 has shown a decrease of 75% face 2019.
Filipe Garcia, economist at the IMF-Information on Financial Markets, emphasizes that the ESG fund market in Portugal is still at an early stage on both sides of the relationship (supply and demand), but there is a growing interest in the subject in various dimensions. “On the demand side, there is already interest from institutional and some more sophisticated clients, with the first to carry out internal operations to monitor the ESG score of companies and funds”, he says, explaining that there is no specific demand for national ESG funds , as this type of investors usually build their portfolios with foreign funds and the issue of nationality is not the most important. “Retail still seems relatively absent in the search for ESG solutions, which makes the development and distribution of national funds difficult, but I believe it is a matter of time”, he says.
Analysts heard by the JE are unanimous in considering that Portugal caught the ESG wave slightly later than the countries of central Europe, where in 2020 the value of assets in sustainable funds totaled 1.1 billion euros.
“This value, which represents a growth of 52% compared to 2019 and was motivated by the increase in inflows for this type of investments, totaling 233 million euros (almost double the value of 2019). It should be noted that, in the first quarter of 2020, the value of ESG assets decreased by 10.6%, having this value increased by 23.2% in the last quarter”, indicates the CMVM’s 2020 Report on the Securities Markets.
According to the supervisor, these growths are also linked to legal and regulatory developments for sustainable investment in Europe, namely the publication of the “Sustainable Finance Disclosure Regulation”, the “Benchmark Regulation” and the “Taxonomy Regulation”. However, they are confident that there is room to grow.
“This is a global trend and in which European coordination and influences are growing, so ESG will naturally and necessarily develop in Portugal. There is a relevant space for retail to grow in terms of interest in this area and this segment will perhaps be the one that can accommodate national funds”, says Filipe Garcia, noting that there is clearly “the interest of companies, specifically those listed or that have issued bonds, to plan and communicate sustainability practices and initiatives and to internally develop skills in this regard.
Bruno Marques exemplifies that “this path started in the energy sector (naturally more focused on energy generation), both from the point of view of debt issuance, and from the point of view of the main investment focus of the funds created by the management companies. assets, but it has been expanding to other sectors and this trend will certainly continue”. Examples of this, tip, will be the projects linked to the circular economy and decarbonization.
Still a niche market
Although it is still a small market, the director of the CMVM’s Issuers Department, Juliano Ferreira, believes that “the direction of the path that is being followed today seems to lead to this market, in an increasingly accelerated way, no longer being perceived as a specific market, or niche, before imposing itself as the mainstream, as the dominant concept”.
“We are still in a transition phase, in which all actors are challenged to question their business models and discover the way to integrate social and environmental concerns in their decision-making processes, while seeking to identify as best practices governments that help them along this path. And the pandemic only made this exercise even more pressing”, he says.
Contributing to this scenario is what Ed Freedman, an economist who disclosed the basis of stakeholder theory (in an interview in this edition of the JE), believes is a more holistic approach. “There are probably many ways to run a business. All ads that, as companies, have a purpose, pay attention to interested parties, try to help solve social problems and combine ethics with business”, he says. But, he stresses: “Of course they also need to be profitable”.