The daily confrontation with the consequences of the changing climate, new laws and regulations have brought the question of more sustainable alternatives in investment to the fore. The special challenges of the industry due to current sustainability trends were equally a topic of the conference as well as the opportunities that develop from them.
After the welcome by Ulrich Martin, Publishing Director at Frankfurt School Verlag, and Stefan Görlitz, Managing Director at Forum Nachhaltige Geldanlage e.V., there followed introductory words by Prof. Dr. Martin Faust, Professor of Finance at Frankfurt School of Finance & Management.
The first major conference topic – regulation – was opened by Will Oulton (Eurosif). Until now, a central problem was that ESG data could only be partially collected and the data that was available was often of poor quality. The definition of “sustainable investment” in the Disclosure Regulation (SFDR), which is supposed to increase the transparency of the collection and the quality of ESG data, how financial market participants integrate sustainability risks and opportunities into their investment decisions and recommendations, was so far rather vague and subjective. Articles 8 and 9 are often misused as a label due to a lack of data. In the future, however, regulation should be more effective: The more reporting that is required, the better the data situation is likely to become. Oulton expects a lot of data and information to be available for the first time next year, which should quickly simplify the further implementation of the regulations. Thus, a uniform EU standard with uniform requirements for ESG ratings should be found in the foreseeable future.
Monetary policy goes green?
Felix Herrmann of Aramea Asset Management discussed the sense and nonsense of green monetary policy in his presentation. The main reason for these efforts is the realisation that climate risks are financial market risks. But what can central banks do to reduce CO2 emissions? For example, they could preferentially buy green corporate bonds or implement green criteria in the context of lending. The ECB has set itself the goal of better managing and reducing risks, among other things by promoting CO2-neutral companies. In the future, climate risks are to be better mapped within the framework of macroeconomic risks, data availability is to be promoted and the bond purchase programme is to be “greened”. In this way, a “greener” monetary policy could certainly be achieved, but according to Herrmann, a truly “green” monetary policy is only an illusion.
Numbers, numbers, numbers
Angela McCleallan, Director Sustinable Finance at PwC, then spoke about the implementation of the Sustainable Finance Regulations. The requirements for ESG data would increase: In addition to the EU Taxonomy Regulation, the EU Disclosure Regulation (SFDR) and voluntary reporting, there is now the EU Regulation on Corporate Sustainability Reporting (CSRD). For all these different regulations, companies would need a variety of ESG data. So far, in addition to internal data such as customer data, external data, for example from ESG ratings, has been used. The problem is that ESG ratings are often non-transparent and hardly subject to regulation. Angela McCleallen assumes that they will nevertheless continue to be of great importance until the implementation of the CSDR, but that they will then decline.
Victoria Arnold (BlackRock) and Manuel Bernes (MSCI) exchanged views in a speed talk on how sustainable investment can make progress in an area of conflict between different interests. During the Corona pandemic, there was a real explosion in the relevance of sustainability, with almost every second euro flowing into ESG strategies. But now, in 2022, there is a countermovement. Nevertheless, both experts are of the opinion that the general structural change towards more sustainability is here to stay. There was also agreement that exclusions of non-green companies were not necessarily the right solution, but rather that the transformation of the economy had to be driven forward. To achieve this, a solid data basis is important. Probably the biggest challenge is that most data can only be looked at retrospectively. The use of so-called “forward looking” data and trends, on the other hand, is still difficult.
Impact investing – the future of sustainable investment?
One of the central topics of the conference was impact investing. The question of whether impact investing can be measured was discussed by Prof. Dr. Christina E. Bannier from the University of Gießen, Jan Hoffmann (FINVIA), Niels Nauhauser (Verbraucherzentrale Baden-Württemberg), Andreas Rickert (NIXDORF Kapital AG) and Felix Oldenburg (gut.org gAG). The consensus in this round was that impact investing must become the standard. It was to be understood that here, too, the data situation was still problematic, which is why, for example, the goals had to be broken down in order to make them comprehensible to the individual investor. This is particularly important from a consumer protection point of view. Crucial here: Transparency and education.
In the subsequent keynote, Andreas Rickert once again emphasised that achieving an impact must become the standard for all investor types and across all investor classes. The world is facing huge climate challenges, and in order to master them, ideas and the capital to implement them are needed. It is important to emphasise that every investment has an impact: If you don’t push for a sustainable impact, the result is often a negative one.
The afternoon of the conference was filled with roundtables and discussions on investment strategies and trends. The topics ranged from biodiversity, the role of sustainability in times of crisis, aspects of impact investing, the impact of physical climate risks to sustainability in real estate investments.
Turning the tide
The conference day closed with a joint keynote by Stefan Bielmeier (DZ PRIVATBANK) and Katharina Beck (Bündnis 90/Die Grünen parliamentary group). Under the title “Changing times in the financial markets”, current topics such as surveys on sustainability preferences and the importance of banks in the current transformation were discussed. The goal must be to overcome the supposed opposition between economy and climate protection. So far, ESG has not had a detrimental effect on the financial markets. Systemic thinking with more regional cycles is important. The conclusion of the keynote: In 10 years, no one will question the relevance of sustainability – not even on the financial market.
This is an automated translation of the German original article.
Photo: Todd Quackenbush via Unsplash