Green investments: Investing sustainably – but how?

Status: 10.11.2022 1:46 p.m

Many investors want to invest their money in a socially responsible, ethical or environmentally friendly way. This is not so easy. Although the market for sustainable products is booming, it is worth taking a closer look.

By Bianca von der Au, tagesschau.de

Since August, bank and investment advisors have had to explicitly ask their customers about their investment preferences with regard to sustainability. In other words: whether you attach particular importance to compliance with certain ethical, social and/or environmental standards when making your investment. That’s what the EU wants.

But in practice there is still a problem. At least that’s what a covert investigation by the environmental organization Greenpeace at Deutsche Bank and Postbank revealed. In a total of 38 consultations, the mystery shoppers were only insufficiently asked about their sustainability needs.

DWS rejects Greenpeace criticism

Financial expert Mauricio Vargas from Greenpeace explains this tagesschau.de: “On the one hand, the advice is still not in a position to offer people with the need for climate protection adequate products in their investments.” On the other hand, the advice can ultimately only be as good as the products that the fund provider develops.

“We cannot understand the criticism expressed by Greenpeace,” writes Deutsche Bank in a statement. DWS, the asset management subsidiary of Deutsche Bank, also rejects Greenpeace’s allegations against its fund – in particular the allegation of misleading consumers.

At the request of tagesschau.de A DWS spokesman emphasizes that asset management has no influence on the bank advisor’s product proposals. The criteria according to which companies can become part of a DWS ESG fund are also clearly stated. For example, companies that make up to 15 percent of their sales with coal are allowed.

A look at the “ingredient list” of a fund is mandatory

ESG stands for “Environment, Social and Governance” and describes sustainable investments. But the term “sustainable” is very flexible, says investment expert Hendrik Buhrs from the online consumer portal Finanztip. “One question is: How does the fund company actually define sustainability? Is that the same assessment that I have myself?” And the second question is whether the agreement is then maintained at all in practice.

Buhrs warns that you shouldn’t blindly rely on the euphonious name of a product. An important step is to look into the “ingredient list” of an investment fund, i.e. which company stocks are actually included. “At least the top ten, the ten largest, I should be able to research on the Internet without any problems and then I should see if I feel comfortable with it.”

Finanztip also points out that so-called sustainability funds often have higher running costs than conventional products. In addition, the citizens’ movement Finanzwende analyzed just over a year ago that the composition of the funds differed only slightly from their conventional reference funds. Christian Klein, Professor of Sustainable Finance at the University of Kassel, warns against misconceptions. “When we talk about sustainable investments, it’s really important that we differentiate: what does this investment actually want to achieve?”

Sustainability expert warns against false hopes

According to Klein, many investors would like to use the levers of the financial market to stop climate change. The majority of the so-called sustainability funds look more at how a company deals with climate change.

Therefore, oil companies looking to transform or automakers moving away from the internal combustion engine could also be included in such funds. Because even with sustainable investments, it is the return that counts in the end.

Investing sustainably – but how?

Bianca von der Au, HR, 9.11.2022 4:45 p.m

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