Ethics fund

from Wikipedia, the free encyclopedia

An ethical funds (often ethical-ecological funds or short- sustainability fund is called) is a mutual fund whose strategy not only on achieving the greatest possible return oriented, but also on ethical issues. He adheres to the principles of ethical investment (English: Socially Responsible Investing ) and only invests in companies that operate sustainably . Usually it is an open equity fund , more rarely a bond fund . The entire market volume such funds in Germany, Austria and Switzerland amounted to 838.83 billion euros in 2019.

Selection criteria

The selection of the securities in which the fund invests is based on a method set out in the fund prospectus. These can be:

  • Exclusion criteria (" blacklist ")
  • Positive selection (" whitelist ")
  • "Best in class" approach
  • Theme fund

These principles can also occur in combination.

Exclusion criteria

The most commonly used principle is that of the exclusion criteria. The fund is not permitted to invest in companies from certain sectors, manufacturers of certain products or users of certain production processes.

Exclusion criteria for sustainable investing can be, for example, child labor, forced labor, human rights violations, armaments, discrimination against minorities, nuclear power, chlorine chemistry, genetic / bio-technology and animal testing.

This method is used exclusively in the case of religiously motivated funds (e.g. Sharia funds ). In Germany, the principle of exclusion criteria is used by 79% of the funds.

Positive selection

With the positive selection, investments may only be made in companies that offer certain products and services or use certain production processes.

Typically, a specific selection criterion is the company's submission to a self-commitment or a norm. This can e.g. B. the regulations of the ILO or the voluntary commitment to only use certified raw materials.

"Best in class" approach

With the “best-in-class” approach, there are no exclusion criteria with regard to industry and product. Instead, the capital should invest in companies that implement the best fulfillment of ecological or ethical standards within their branch. In Germany, the “best in class” approach is used by 52% of the funds.

"Best-in-progress" approach

The little-used best-in-progress approach selects those companies that have improved their sustainability profile the most in the recent past.

Theme fund

Some funds are also designed as theme funds. If these topics are based on ethical or ecological issues, the funds themselves are also considered ethical or eco funds. Such theme funds are z. B. Funds on the topics of water, solar energy or waste disposal.

Eco funds

An eco fund is a sustainability fund that only invests in companies that use ecological resources sustainably . Such companies pay attention to the lowest possible (negative) environmental impact of their activities and products with regard to their planning, production, use, recycling and disposal.

Many eco funds invest specifically in so-called renewable energies such as wind and solar energy .

The distinction between the terms eco funds and sustainability funds is not always clear in the language used and especially by the fund providers themselves. Sometimes they are used as synonyms or interchanged. If you want to invest in a sustainability or eco fund, you should therefore find out in each individual case, according to recommendations from consumer advocates, in which companies and sectors the respective fund actually participates. From the point of view of the consumer organization Stiftung Warentest , only a very small number of closed eco funds are recommended. An investigation in October 2013 found that almost all funds are deficient.

Earnings comparison with conventional investment funds

When investing in ethical funds, there are restrictions in the investment policy that can affect the return. This includes:

  • There is an additional effort in environmental research
  • The investment universe is restricted. This allows
    • negative effects in terms of portfolio diversification and
    • positive or negative effects result from systematic risks and opportunities
  • Investments are more common in small-cap companies, as the probability of falling through the selection criteria increases with company size.

Whether the returns from sustainability funds are higher or lower than with conventional investments is empirically controversial.

Effort in environmental research

In addition to the (still necessary) analysis of the securities from the point of view of income, an additional effort is necessary for ethical funds, namely the analysis of compliance with the ethical criteria.

This expense reduces the fund's return and tends to lead to a poorer performance of ethical funds. Most ethical funds are actively managed funds, but the cost advantages of index funds can be felt more strongly through an increasing number of corresponding indices.

In many cases, ethical funds have higher sales charges and overall costs than conventional funds. However, this does not apply to all products.

Reduced investment universe

The size of the possible investment universe determines the scope for diversifying the portfolio. According to portfolio theory , an “artificial” downsizing of the investment universe through ethical rules leads to an increase in risk or a decrease in return. The practical relevance of this effect is determined by whether there are still a sufficiently high number of low- correlated investment opportunities in the remaining investment universe .

This effect is particularly high when the investment policy is controlled on the basis of exclusion criteria. Since then z. For example, if entire industries are excluded, there are no essential investment options for optimizing the portfolio.

In this case, the restriction of the investment universe can lead to a systematic overshoot or undershoot of the return of the market and that of other investment funds.

If, for example, no investments are made in genetic engineering companies, the fund will systematically beat the market if genetic engineering products do not establish themselves on the market and just as systematically remain below the market return if this technology prevails in the future.

Small company effect

Large and highly diversified companies operate in many areas of business. Since (if the "best in class" approach or the theme fund approach is not chosen), every single violation of the investment guidelines often leads to the company being excluded from the investment universe, portfolios of ethical funds often focus on smaller companies ( small caps ) . This effect occurs particularly with particularly strict guidelines. First of all, this has an impact on liquidity . Due to the tight market, an exit from a security is sometimes only possible over a longer period of time or with price discounts.

In addition, lower capitalized companies typically have higher volatility , which increases the risk of the portfolio.

Effect with regard to the desired ethical goals

In addition to the financial return for the investor, ethical funds focus on supporting the respective ethical goal. To what extent investing in ethical funds can help motivate companies, consumers or politicians to change behavior is controversial.

Direct effects

Three possible direct effects are discussed:

  • Ethical funds can acquire high enough shares in companies that they can determine management and policy.
    This point is currently being discussed at most on a theoretical level.
  • Funds can finance business models through private equity that would otherwise not have been financed.
    This business model is the subject of ethical closed-end funds . An example of this are citizen solar systems .
  • The boycott of the ethical funds worsens the financing conditions of companies that do not comply with the ethical principles of the fund and these companies suffer a competitive disadvantage as a result.
    This aspect is the subject of scientific discussion, with two approaches being advocated: On the one hand, the assumption can be made that investors in ethical funds are willing to accept a lower return on their investments than the market interest rate. In this case, raising capital would be cheaper for ethically acting companies. However, this is not part of the business policy of the open ethical funds currently on the market. You predict a market rate of interest. On the other hand, investors hope that the investment boycott in certain companies will increase their financing costs. However, this is not to be expected in a free market as long as the investment decisions of only a small fraction of investors are determined by ethical principles.

Direct effects of investing in open ethical funds have not yet been empirically proven.

Indirect effects

As an indirect effect, companies gain a positive image if they are included in the portfolios of ethical funds. They reduce the work involved with critical shareholders and broaden their shareholder structure. Sales figures for ethical funds also provide the public with a picture of what investors want in terms of content and create an incentive for a corresponding corporate policy.

history

Ethical and ecological investments in the form of open-ended investment funds have only been known since the 1970s. Forerunners were church-based investors who since the 19th century, but especially since the 1920s, refrained from investing in "sin stocks" - especially alcohol, tobacco and gambling companies.

In 1971 the "Pax World Fund" was launched in the USA as the first open ethical investment fund. He turned the protest against the Vietnam War and the apartheid regime in South Africa into an investment.

The GLS joint bank was founded in Germany in 1974 and exclusively offers capital investments based on ethical principles. In 1984 the Ökobank was founded.

In 1989 the “Luxinvest Securarent” - today Luxinvest ÖkoRent - of the BfG Bank , today SEB AG , was issued as an eco-fund . In 1990 it followed with "CS Oeko-Protect" - today Credit Suisse Equity Fund (Lux) Global Sustainability - the first eco-fund in Switzerland.

This was preceded by the not undisputed joint initiative of Artus Ethische Vermögensverwaltung and Concorde Ethische Vermögensverwaltung, which had founded Concorde-Artus Ethische Vermögensverwaltung GbR in 1988. They were then invested in three established British and two American ethics funds. A winding-up order due to the conduct of unauthorized banking business by the Federal Financial Supervisory Authority, the reasoning of which turned out to be legally incorrect and therefore unjustified a few years later, led to the GbR being wound back.

In 1999 the Dow Jones Sustainability Indices were founded, which represent an interesting alternative or even a supplement to the sustainable fund offerings.

Since May 2008, the (European) transparency logo for sustainable retail funds has ensured more transparency in the sustainable investment market. Which is significant, as products in this market have often fallen into disrepute for misclassification due to a lack of corporate insight.

“Ethical Funds” as a Marketing Measure

Fund providers are sometimes accused of misusing the ethical orientation merely as marketing slogans , e.g. B. to benefit from the debate about the climate debate .

The terms sustainable , environment , eco , green or sustainable in connection with investment funds are also not protected by law.

seal of approval

Various providers offer seals of approval or ranking lists that funds that meet their requirements can receive.

The Austrian company Software-Systems, under the name “FER Finance & Ethics Research Services”, offers a measurement of the extent to which funds meet the standard requirements of the most important ethical, social and environmental criteria and thus determines the “FER Fund Rating”.

In December 2015, the Forum for Sustainable Investment awards the FNG seal for sustainable retail funds.

Triodos Bank also uses its own department and external auditors to assess whether companies meet their sustainability criteria.

Web links

literature

  • Stefan Ruenzi: Keyword: Ethics Fund , in: Die Betriebswirtschaft, Volume 65, 1/2005, pp. 101-104.
  • Christian Nitzl: Ethics Fund: Funding , Realization and Performance , Munich 2008.
  • Martin Faust, Stefan Scholz (Eds.): Sustainable Investments - Products, Strategies and Consulting Concepts , Frankfurt a. M. 2008, ISBN 978-3-937519-93-7 [1]
  • Peylo, BT: Return / Risk Optimization of Sustainability Funds. A conceptual and empirical study. Lüneburg: Center for Sustainability Management (CSM), 2008 ( CSM Lüneburg: online as PDF at leuphana.de )
  • Peylo, BT & Schaltegger, S. (2009): Impetus for the management of sustainability funds . Sustainable investment under the microscope , in: Betriebswirtschaftliche Blätter, No. 8, pp. 441–449

Individual evidence

  1. ↑ a b c Claudia Tober: Market Report Sustainable Investments 2020. In: www.forum-ng.org. Forum for Sustainable Investments e. V., June 2020, accessed on June 11, 2020 .
  2. ↑ European SRI Study 2006 ( Memento of March 5, 2016 in the Internet Archive ), page 8.
  3. ↑ Franz-Josef Sehr : Diocese of Limburg: "To be best in class is better than penalties through exclusion" . In: Universal-Investment-Gesellschaft mbH (ed.): Allocate! No. 4, summer 2010 . Frankfurt 2010, p. 10-11 .
  4. ↑ Closed eco fund at Stiftung Warentest in the test , last accessed on November 5, 2013 (chargeable).
  5. ↑ Red card for eco funds , last accessed on November 5, 2013.
  6. ↑ Philipp Möhrle: Successful marketing of eco-funds beyond the niche ; ISBN 3-906502-95-3 ; Page 26.
  7. ^ History of Pax World Funds, one of the originators of sustainable investing . In: Pax World Funds . ( paxworld.com [accessed June 28, 2018]).
  8. ↑ Philipp Möhrle: Successful marketing of eco-funds beyond the niche ; ISBN 3-906502-95-3 , page 22.
  9. ^ Jürgen Conrads: Investments with social responsibility. Gabler, 1994, accessed June 14, 2016 (German).
  10. ↑ Administrator: TRANSPARENZLOGO - Forum Sustainable Investments (FNG). Retrieved June 28, 2018 (German).
  11. ↑ € uro Fund Research - More transparency in the market for sustainability funds
  12. ↑ Handelsblatt - Determine what the money does