Der Kritik widerstehen: Wie sich nachhaltige Anlagen wirklich für die Umwelt auswirken

Green Finance: Who Benefits?

When it comes to sustainable investments, the outcomes are not just positive for providers, consciences, and finances, but they also have a significant impact on the environment. But what sets apart those that truly make a difference?

Green investments have become a lucrative venture in the financial sector. However, according to finance expert Stephan Lehmann-Maldonado, the initial enthusiasm is now giving way to disillusionment. – Unsplash

The Key Points in Brief

• Sustainable investments in Switzerland exceed the country’s GDP.
• ESG investments have a limited positive impact on the environment.
• Patents could serve as an exciting indicator of eco-efficiency.

As a child, my connection to nature was as strong as that of Idefix, Obelix’s dog: I would howl in protest whenever a tree was felled.

„I want to write my dissertation on eco-funds,“ I told my professor at university. At first, she appeared puzzled, then sympathetic – and eventually agreed.

ESG Eldorado – Running Dry?

Over the years, every reputable bank now touts investments based on ESG criteria. ESG stands for „Environment,“ „Social,“ and „Governance.“ Since the UN laid down its 17 Sustainable Development Goals in 2015, financial providers have seen sustainable investments as a new goldmine.

Despite the recent slowdown, the volume of such investments in Switzerland amounts to 1,660 billion Swiss Francs, as per the latest market study by the Swiss Sustainable Finance Forum. This surpasses double the Gross Domestic Product.

From over 2,200 studies on the subject, the majority concludes that integrating ethical and ecological criteria into investments not only does not diminish returns but actually boosts financial performance.

Positive Impact – Blowing in the Wind

One lesser explored aspect is the environmental benefits of ESG vehicles. For instance, the „Center for Sustainable Finance and Private Wealth“ at the University of Zurich took a closer look. It argues that sustainable investments have the potential to address global environmental issues but fall short of fulfilling this promise.

For instance, if an investor purchases shares in the Danish wind turbine manufacturer, Vestas Wind Systems, the proceeds from selling the shares go to the seller rather than the company. While the demand does impact the share price positively, theoretically lowering financing costs, this effect is minimal for listed companies.

To truly make a positive impact, one should consider investing directly in young companies developing sustainable solutions for the future. However, such Impact Investments require a higher risk budget.

ESG investments face criticism for another reason. The ESG taxonomy is somewhat subjective and not derived from natural laws. This has led to a proliferation of labels from various rating agencies. While the EU Commission seeks to streamline this with lengthy regulations, Swiss authorities are introducing a type of quality label – the Swiss Climate Scores. However, these efforts have seen limited success in the market.

Patents – More than Just a Green Facade

German mathematician Andreas Beck offers an intriguing alternative approach. His motto is „Actions speak louder than words.“ Rather than comb through sustainability reports to identify top companies, he delves into patent databases. Companies with numerous green patents in the pipeline are likely to reduce their environmental footprint.

Together with Lucas von Reuss, Beck added an „I“ to the ESG trio. This letter stands for two things: Innovation and Impact. Interestingly, many European industrial giants, such as Thyssenkrupp and Bayer, excel in patents. Surprisingly, even automakers like Toyota and Hyundai outperform expectations. In contrast, US tech giants are falling short.

For those looking to invest in green champions using the ESGI Index, there’s a waiting period. „We are planning to launch two ETFs with a partner under the names GTI World and GTI World Small Cap, likely starting in September. GTI is short for Green Transition Innovators,“ says Nicolas Kocher, the Managing Director of Index Consulting. Perhaps Idefix will be wagging his tail happily by then.