Focus on climate protection: The new era of sustainable investments in Germany!

Focus on climate protection: The new era of sustainable investments in Germany!

In 2019, the EU set important guidelines for converting the economy to climate protection. Private investors are particularly called upon to make their contribution. The ESG concept (Ecology, Social, Governance) has become increasingly important in recent years and rating agencies have developed specific criteria for evaluating companies. However, sentiment towards ESG in the US has become strongly negative under President Trump, resulting in asset managers withdrawing capital from companies with good ESG ratings and investing in conventional companies. These developments raise the question of whether the ESG concept has failed, which was discussed at the SZ Sustainability Summit.

The panelists rejected the claim that ESG has failed. Kristina Jeromin emphasized that it was not the concept itself, but rather its implementation in the mainstream that fell short of expectations. It calls for an appropriate allocation of capital to companies that reduce climate risks. The aim is to counteract the widespread awareness of unsustainable business models, such as the construction of coal-fired power plants. According to Mauricio Vargas from Greenpeace, political frameworks are essential to achieve climate and water protection goals.

Growth of sustainable investments

The growing demand for sustainable investments represents a social change. Investors are increasingly interested in supporting climate protection and social challenges in addition to returns. The definition of sustainable investments takes into account not only financial, but also ecological, social and ethical criteria. The products are based on ESG criteria, which are of great importance for the evaluation of investment products.

Examples of sustainable investments include renewable energy, energy efficiency and water supply, which not only offer environmental benefits but also enable attractive returns. In Germany, the assets under management of sustainable funds rose to 107 billion euros in 2020, an increase of 43.8 billion euros. This clearly shows that sustainable financial products are on the rise and there is growing interest from investors.

Diversity of investment strategies

An important aspect of sustainable finance is the different investment strategies that investors can pursue. These include exclusion criteria - for example for weapons or fossil fuels -, the best-in-class principle, impact investing with measurable positive effects on the environment and society, and thematic funds for specific concerns such as water and health.

A particularly important point is the EU taxonomy, which has been defining scientific criteria for sustainable economic activities since August 2022. This ensures greater clarity and transparency and has tightened the disclosure requirements for providers of financial products since 2021. Financial institutions have to ask investors about their sustainable goals, which contributes to increased sensitivity in the financial sector.

A prominent example of sustainable investments is DekaBank, which integrates sustainability into its investment decisions. With a multi-tiered ESG approach, it offers a variety of climate-conscious products, including equity funds and green bonds. Their commitment includes, among other things, dialogue with companies and exercising voting rights in order to influence sustainable corporate practices.

In summary, sustainable investments promote a green future on the one hand and contribute to investors' financial provision on the other. The potential is enormous, but the challenge remains to further anchor sustainable practices in the mainstream. Whether this succeeds will largely depend on the political framework and the commitment of companies.

For more information read more on South Germans and environmental dialogue.