New EU rules: Investment advisors must query sustainability

Invest money and do good at the same time – it’s not that easy. Terms such as “green”, “sustainable” or “climate-friendly” are not protected. New EU guidelines are intended to provide more clarity.

Green investments are booming – especially in Europe and Germany. According to the analysis company Morningstar, 80 percent of the investments that flowed into green investments come from Europe. From Germany alone, that’s a total of more than 130 billion euros: According to the latest report by the “Forum Sustainable Investments” trade association, private investors in Germany tripled their investments that are considered sustainable last year.

The deputy managing director of the German Association for the Protection of Securities, Jella Benner-Heinacher, notes the growing interest in green investments, but advises caution: “Unfortunately, there are still no really precise minimum standards, and there is also no real label that says: It’s sustainable, so it’s green.” As a result, “a lot of what is actually a classic product is sold as green,” says Benner-Heinacher.

New advisory obligation applies from today

This is exactly where the EU Commission wants to shed light on with a series of regulations. Under the abbreviation “Mifid II”, new guidelines have gradually come into force since 2018, which are intended to make the sale of securities more transparent and the financial system more sustainable at the same time.

Another part of this reform program comes into effect today: from now on, financial advisors must explicitly ask investors whether they want to invest their money sustainably. But there are pitfalls lurking here, too, believes investment strategist Christian Kahler from private asset management Kahler and Kurz Capital: “We know these processes: 20 to 30 pages of small print are handed out. In the end, the customer still has to sign, and there’s always a risk , that in detail not everything is read so exactly.”

EU taxonomy is ambiguous

Consumer advocates advise anyway that investors should find out about the main business of the company or the fund. Because some providers do not invest in coal, nuclear power or weapons, but invest mainly in highly controversial sectors such as nuclear power. And even with an EU seal.

Because the so-called EU taxonomy, a kind of catalog for climate-friendly investments, is intended to help investors classify their investments. However, it also recognizes investments in gas and nuclear power as climate-friendly. This caused criticism in advance. Investor advocate Benner-Heinacher therefore considers it crucial that investors think about which criteria are important to them when investing: “Most of the investors who contact us also want to make a difference with their investments. It’s called one ‘Impact Fund’.”

The expert thinks the idea of ​​sustainable investments is a good one, but: “You should still take a very close look and, very importantly, not lose sight of costs, returns and risks. After all, sustainable doesn’t mean without risk and without costs.”

Also oil companies in sustainable funds

According to the experts, all these points cannot be weighed up in general. Especially since the non-governmental organization Finanzwende found in an investigation of sustainable funds that their composition hardly differs from conventional funds.

Even oil multinationals with poor environmental records or online retailers with questionable working conditions were included in so-called sustainability funds. The bottom line is that investors have to take a close look at how sustainable the companies or funds they want to invest in actually are.