Economy ESG
Sustainable and profitable? The false promise of eco-funds
Status: 03.05.2024 | Reading time: 3 minutes
Quelle: Getty Images
You can listen to our WELT podcasts here
In order to display embedded content, your revocable consent to the transmission and processing of personal data is necessary, as the providers of the embedded content require this consent as third party providers [In diesem Zusammenhang können auch Nutzungsprofile (u.a. auf Basis von Cookie-IDs) gebildet und angereichert werden, auch außerhalb des EWR]. By setting the switch to “on”, you agree to this (revocable at any time). This also includes your consent to the transfer of certain personal data to third countries, including the USA, in accordance with Art. 49 (1) (a) GDPR. You can find more information about this. You can revoke your consent at any time using the switch and privacy at the bottom of the page.
Investing according to ESG criteria, i.e. minimum standards in environmental and climate protection, working conditions and corporate governance, have been promoted and promoted by the EU for years. But they don’t deliver what they promise, as these graphics show.
Money makes the world go round, they say. So why shouldn’t it also pave the way for climate protection? At least that’s what everyone who propagates the investment according to so-called ESG criteria believes.
The acronym stands for Environment, Social and Governance. It means that investments are excluded from companies that do not meet minimum standards in environmental and climate protection, working conditions and corporate governance.
Source: Infographic WELT
The European Union is promoting this form of investment with ever new guidelines, and fund companies are eagerly participating. Only investors don’t want to know about it. This is reflected in the inflows into the corresponding funds.
also read
They are classified based on the EU Taxonomy Regulation: Article 6 has only low requirements, Article 8 has significantly higher requirements and Article 9 imposes the strictest requirements. But funds that follow the strictest criteria have had to accept outflows in 2023, according to an analysis by the fund rating agency Morningstar.
This is reflected in the attitude of German savers. A survey commissioned by the consulting firm BearingPoint recently revealed that, on average, only six percent consider ESG criteria to be crucial when purchasing stocks, bonds or funds.
Source: Infographic WELT
There are slightly more for younger people and even less for older people. Other things are more important. “Factors such as returns and costs continue to have a strong influence on investment decisions,” says Robert Bosch, Head of Banking & Capital Markets at BearingPoint.
No wonder – investments based on ESG criteria have recently cost a lot of returns. For example, the S&P Global Clean Energy Index has fallen by around a third since the beginning of 2022, while the S&P World Energy Index, which also includes fossil energies, rose 50 percent over the same period. This has a lot to do with the resurgence of the oil and gas industry after Russia invaded Ukraine.
Source: Infographic WELT
This can of course be reversed. However, another problem is fundamental. Because only in few sectors is it as clear as in the energy sector what is actually sustainable. Agencies therefore want to provide clarity through ESG ratings and classify listed companies based on how they meet sustainable criteria.
Most funds base their selection of companies on this. But five economists have now shown in an analysis that these assessments are completely inconsistent. The economists from the universities of Cologne, Kassel, Augsburg and St. Gallen compared the results of five rating agencies – it turned out that the agreement between two of them rarely exceeds 50 percent.
Source: Infographic WELT
The agreement between all five was only 18.5 percent. “This result calls into question whether ESG ratings are a suitable instrument for aligning financial flows with sustainability criteria,” said the economists.
Many financial scientists go even further: they doubt the meaning of sustainable investing itself. So far, no scientific study has shown an influence of such an approach on the behavior of companies, for example their contribution to climate protection. Because if investor A doesn’t buy the share, investor B will – and in case of doubt that is the public fund of an oil state. His money also moves the world.
Here you will find content from third parties
In order to display embedded content, your revocable consent to the transmission and processing of personal data is necessary, as the providers of the embedded content require this consent as third party providers [In diesem Zusammenhang können auch Nutzungsprofile (u.a. auf Basis von Cookie-IDs) gebildet und angereichert werden, auch außerhalb des EWR]. By setting the switch to “on”, you agree to this (revocable at any time). This also includes your consent to the transfer of certain personal data to third countries, including the USA, in accordance with Art. 49 (1) (a) GDPR. You can find more information about this. You can revoke your consent at any time using the switch and privacy at the bottom of the page.