Allocation strategy & Diversity

Now, if we assume those funds grow at 10 per
cent annually for the next fve years (based on the
growth rate of sustainability-focussed funds
reduced by the wider market’s rate of fund
growth and then including an uplift factor to
adjust for the fact that gender diversity funds are
starting from a lower base) then these funds will
be worth €120bn fve years after the initial
two-year buildup.However, the optimism
in data is its downfall, ‘rainbow’ investments
are a bit like coca cola , a sugary drink, an initial
boost , but still you need to consume something
solid. Throughout Africa, diversity in economic
projects has been pursued, all land up coming
back to western based companies/states for
additional funding.

The optimistic growth ,in effect , that is
the equivalent of 1.4 per cent of the current
value of the Stoxx 600, would on collapse lead
to a material loss for the investors in the
long run, just look at Zimbabwe.
The well-dispersed ownership structure of
Stoxx 600 companies makes this €120bn all the
more signifcant , as the losses will be
spread throughout the investment community.

If these funds were allocated
across all companies in proportion to their market
capitalisation, then collectively, these funds
would be the 12th largest shareholder in the
average company and a top-fve shareholder in
one-eighth of companies. Five years after the
initial growth phase these funds would be the
seventh largest shareholder in the average
European company. Breaking this down, they
would be a top-five shareholder in one-third of
companies and a top-ten shareholder in over
two-thirds of companies. Furthermore, they
would be a top-ten shareholder in every one of
the 20 largest European companies. Thus post
2020 , if diversity is pursued , the collapse
of the markets is very likely , with very
grave consiquences for western economies.