More and more private investors are paying more attention to sustainability when investing. The financial industry has long since responded. But finding “green” companies and funds remains difficult.
By Andreas Braun, tagesschau.de
Lower CO2 emissions, more climate and environmental protection, but also more justice and social equilibrium in society: more and more German citizens want to pursue these goals in their investments and retirement provision.
In the Corona crisis in particular, more and more private investors are relying on investment funds that observe sustainable criteria. According to statistics from the BVI fund association, the volume of these funds rose by more than a quarter in the third quarter of 2020 to now 129 billion euros. In contrast, sales of “conventional” funds are stagnating.
Shares in companies that are active in areas such as renewable energies, environmental protection or hydrogen technologies are also in high demand on the stock exchanges. In the Corona crisis, prices are rising even more sharply than before.
Only some of the funds with a seal
The “Forum Sustainable Investment” (FNG), the professional association for sustainable investment in German-speaking countries, has determined a share of five percent in sustainable products. The market for systems with a focus on sustainability is “established, but not yet arrived”, according to the FNG’s current 2020 market report.
This is also due to the fact that there is no uniform definition of “ecological” or sustainable for financial products. According to the FNG, only about 18 percent of the funds are “certified”, so they could show a sustainability seal.
One of the goals of the EU’s “Green Deal”, which is to make Europe climate neutral by 2050, is that global financial flows are shifting more towards ecological and social investments. With a set of rules, the so-called “taxonomy”, all economic activities will be classified according to their sustainability in the coming years. This initially applies to climate protection goals; by the end of 2022, all sustainability goals should be defined.
As early as March 2021, banks, asset managers, insurance companies and fund companies will be obliged to inform investors about so-called “sustainability risks”. This means possible risks that result from the fact that a financial product takes ecological or social criteria into account.
What’s in the fund?
When it comes to choosing a stock or an investment fund, however, consumers are on their own for the time being. They need to tap into the companies and funds they want to invest in to see if and to what extent they are truly sustainable.
In the case of investment funds, it is helpful to take a look at the monthly or quarterly reports, but above all at the fund manager’s portfolio, which is accessible from the fund company, but also via many finance portals. Funds generally follow different selection processes in order to become more “sustainable”. For example, exclusion criteria are often defined: According to this, shares in companies that are active in nuclear power, fossil fuel combustion or genetic engineering are excluded.
The best of all classes
Another option is the “best-in-class” approach. The most sustainable companies in various industries are identified and taken into account in the fund. In order to sift between sustainable and less sustainable companies, so-called ESG data are often used. The abbreviation stands for Environment (E), Social (S) and Governance (G), i.e. corporate management.
However, some of the sustainability funds are deliberately aimed exclusively at companies that are active in sectors that directly promote climate protection or the environment. This could be renewable energies, ecological agriculture or the preservation of clean water. The fund managers want to achieve a direct “impact”.
In addition to conventional fund products, many index funds, so-called ETFs, are now also on offer. Here too, depending on the index, individual sectors are excluded and selected according to eco-criteria. If you are interested, you should also take a close look at the index logic here. It is published by the fund providers or the index providers.
Many sustainability funds now also publish their “CO2 footprint”. The buyer can therefore see how much lower the CO2 emissions of the companies in the fund are compared to a benchmark index.
ESG ratings show the way
Anyone who as a private investor wants to rely on individual stocks in order to invest money sustainably can also benefit from a look at the composition of good sustainability funds. Large listed companies are now obliged to publish sustainability reports. These must contain information on energy efficiency, emissions or resource consumption.
Special rating agencies such as MSCI-ESG have also made their ESG ratings publicly available. In this way, investors can also check what the environmental rating of “their” companies looks like in their own portfolio.
Many studies have shown that the return on sustainable fund products or stocks is no worse than that of their “conventional” counterparts. The University of Hamburg, for example, recently evaluated a large number of surveys on this. Result: Almost all studies come to the conclusion that a clear conscience when investing money does not have a negative impact on performance.
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