Ethical investment

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Magical square of ethical and sustainable investments

Under ethical investment refers to investments , in addition to the economic investment objectives yield , safety and availability even ethical consider and sustainable values of the investor. The magical investment triangle becomes a square. Often there is also talk of ethically-sustainable investments, sustainable, ecological and socially responsible investment (English socially responsible investment , SRI). In the case of sustainable investments, the abbreviation ESG is used for the three sustainability criteria - after the English terms Environment (E), Social (S), Governance (G). The ESG approach has become the standard in the financial sector to delimit sustainable investments.

history

The idea of ​​ethical investments has its origins in the Anglo-Saxon free churches: The founder of the Methodist Church, John Wesley, emphasized the connection between beliefs and the handling of money. As early as the 18th century, the Quakers refrained from investing in companies involved in arms production and the slave trade. The idea was continued in the 1970s in the movements against apartheid in South Africa and against the Vietnam War . “No money for armaments and apartheid” was the motto of those who did not want to use their money to finance what they refused with their political commitment. Funds with exclusion criteria for these activities were first created in the USA and Great Britain , especially for institutional investors such as universities, foundations and churches. In Europe, especially in Germany, resistance to nuclear power was added as a further criterion. In the seventies the GLS community bank started, in the 1980s other alternative banks such as the Ökobank in Germany and the Alternative Bank Switzerland were added, which finance ecological and social projects.

Since the 1990s , criticism of globalization and the expansion of speculative financial transactions has played an increasing role in ethically motivated investment. In addition, there was an increasing issue of climate change. The divestment movement that has emerged since 2010 is primarily aimed at institutional investors and aims to encourage them to withdraw investments from the fossil energy industry and, if possible, shift them to climate-friendly or at least climate-neutral investments.

There is no binding method for everyone to invest money according to ethically sustainable criteria. Your own values ​​play just as much a role as the investment volume, the expected return, the investment horizon, the risk profile or, for institutional investors, the legal framework.

Criteria and instruments

Avoiding - promoting - shaping: There are suitable instruments for creating ethically sustainable investments for each of these possible actions.

Roughly two approaches to ethical investment can be distinguished: the exclusion or disinvestment from financial investments on the one hand and the targeted investment on the other. When investing according to positive criteria or best-in-class approaches, the investor can try to exert influence on companies from within (see the section on Engagement and exercising voting rights ). The threat of - even partial - disinvestment can be used as leverage. If a financial commitment is categorically unacceptable for him for moral reasons or if the attempt to exert influence from within proves to be fruitless, then excluding an investment from his portfolio may be the method of choice.

The nomenclature of ethical investment approaches differs between organizations. Eurosif provides an overview of the various approaches, based on its own nomenclature, that of the Global Sustainable Alliance (GSIA), the Principles for Sustainable Investment (PRI) and the European Funds and Asset Management Association (EFAMA) (see table). Eurosifs nomenclature is governed by the by the European Commission set up high-level Expert Group on Sustainable Finance (HLEG) and therefore is based on a pan-European audience.

Ethical Investment Nomenclatures
Eurosif GSIA equivalent PRI equivalent EFAMA equivalent
Exclusion of investments Negative / exclusive screening Negative / exclusive screening Negative screening or exclusion
Norm-based screening Norm-based screening Norm-based screening Norm-based approach
Best-in-class selection Positive / best-in-class screening Positive / best-in-class screening Best-in-class policy
Sustainability-themed investment (theme and direct investment) Sustainability-themed investment (theme and direct investment) Sustainability-themed investment (theme and direct investment) Thematic investment
ESG integration ESG integration Integration of ESG matters
Commitment and exercise of voting rights in sustainability issues Corporate engagement and shareholder action Active ownership and engagement (three types): a) Active ownership b) Engagement c) (Proxy) voting and shareholder resolutions Engagement (exercise of voting rights)
Impact investing Impact / Community Investing

Exclusion of investments

In this way, investors avoid investing money in activities that they reject for ethical and sustainable reasons. Securities of companies, countries and organizations can be excluded. Typical exclusion criteria for companies relate either to their products - e.g. B. (banned) weapons, nuclear power - or the mode of production, z. B. Production under inhumane working conditions, human rights violations. A classic exclusion criterion for countries is the practice of the death penalty.

The sale of investments that are already in the portfolio but do not meet the newly defined exclusion criteria or no longer exist is called divestment .

Norm-based screening

Norm-based screening is the review of investments for their conformity with certain international standards and norms, for example ILO core labor standards, UN Global Compact. Exclusion criteria can be used as a basis for negative screening , positive screening , on the other hand, specifically includes investments in a portfolio based on positive criteria .

Best-in-class selection

Best-in-class approach

The “best-in-class” approach, in which all titles within an industry are compared with one another on the basis of ethically-sustainable aspects and those are selected that do best. Depending on the values ​​of the investors, investments can be made in environmentally conscious companies or in countries that are particularly successful in combating corruption.

Best-in-progress approach

With the “best-in-progress approach”, those companies are selected that have improved their sustainability profile the most in the recent past.

Positive criteria

In this way, among similar investment opportunities, those are identified and preferred that are rated better from an ethically-sustainable point of view.

Thematic and direct investments

These include B. Microfinance investments and equity investments or real estate investments. Popular topics are renewable energies: wind power, solar, geothermal energy, but also green real estate, forests, water.

integration

Explicit inclusion of ESG criteria and risks in traditional financial analysis.

Engagement and exercise of voting rights

Anyone who owns shares or cooperative shares in a company belongs to its owners and has the right to vote on company matters. These voting rights can be used to enforce ethically sustainable issues. The influence on a company can be increased by the fact that the investors explain their reasons for their voting behavior in a dialogue with the company or, independently of this, press for improvements in the direction of more sustainability or the elimination of certain grievances.

Impact investment

Investments in companies, organizations or funds with the aim of influencing social and ecological issues in addition to financial income.

Membership and Initiatives

By actively supporting initiatives by like-minded investors, ethically-sustainable goals can also be pursued.

Types of investment

Antje Schneeweiß differentiates between three basic forms of ethical investments:

  • Funding savings opportunities with alternative banks
  • Direct investment in unlisted companies
  • Ethical mutual funds

In addition, there is the fourth possibility

  • Invest directly in publicly traded stocks of sustainable companies

Funding savings opportunities with alternative banks

Ethical banks offer classic savings products (overnight accounts, fixed deposits, savings bonds, savings books) and use customer deposits according to their own criteria and instruments. The banks grant loans with an ecological, social or cultural purpose and invest the money according to defined sustainability criteria. In addition, with some savings products it is possible to donate part of the interest in a targeted manner. In the German-speaking area there are several banks that work according to ethical criteria:

  • The GLS community bank in Bochum grants loans to social, ecological and cultural projects and initiatives and regularly publishes all loans granted. It is considered the first bank that works according to socio-ecological principles.
  • The environmental bank in Nuremberg grants loans exclusively to ecological and sustainable projects such as the renovation of old buildings, energy-saving houses, solar systems, wind power and ecological construction.
  • The EthikBank is a branch of Volksbank Eisenberg and follows a mix of taboo and positive criteria for its investments. As a “transparent bank”, it regularly publishes all individual loans, investments in the capital market and participations.
  • The Bank für Orden und Mission is a branch of the VR Bank Untertaunus eG in Idstein and invests the money invested with it in accordance with ethical principles. It does not give loans. Part of the business profit goes to the mission center of the Franciscan Order .
  • The Steyler Bank in Sankt Augustin makes its investments according to ethical criteria on the basis of the Frankfurt-Hohenheim guidelines . Profits will be used for the aid projects of the Steyler missionaries .
  • The Evangelical Bank was created in September 2014 through the merger of the Evangelical Credit Cooperative (EKK) in Kassel and the Evangelical Credit Cooperative (EDG) in Kiel . She uses a sustainability filter in asset and own investment management.

Banks based in Switzerland and the Netherlands

  • The Triodos Bank funded environmental, social and cultural projects and enterprises, providing investments to residential and business customers. It is a Dutch credit institution with a branch in Frankfurt am Main .
  • The Alternative Bank Switzerland (ABS) in Olten promotes alternative energies, organic agriculture, women's projects, ecological and social enterprises, education and culture, development cooperation, alternative and social forms of housing and social projects.

Other banks

Direct investment in unlisted companies

The investor provides the company with money directly through shares or bonds and participates in the profits through distributions or fixed interest. He shares the risk. Here, too, the money directly finances the activities desired by the investor.

Individual projects can be supported directly with direct loans. There are various investment options for ethically motivated investors:

  • Renewable energies are mostly offered through limited partnerships .
  • The alternative banks advertise for cooperative shares or shares to cover the promotional loans with equity .

Membership in a cooperative can also encourage direct investments:

  • The ecumenical development cooperative Oikocredit arranges the investments of its members in the form of fair loans to companies and cooperatives in poor countries. At present, around 65 percent of the loans are granted to microfinance institutions, the other 35 percent are direct loans to companies, primarily in the fields of agriculture, food processing and small businesses.

Ethical and sustainable investment funds

The investor invests in ethically, ecologically or sustainably oriented investment funds (also called ethical funds ), the management of which is committed to restricting possible investments to those that meet certain ethical and / or sustainability criteria. The negative and positive criteria mentioned at the beginning and, within the latter, the so-called best-in-class approach (see below) are used for the selection.

Special rating agencies such as oekom research , sustainalytics, imug, MSCI , InRate, Friesenbichler or Südwind-Institut assess companies, but also entire countries and large organizations, with regard to certain ecological and social criteria. Within those who have passed the selection criteria, the fund management decides on the basis of traditional economic criteria. Due to the market-oriented selection process, the effects are less tangible. The companies only have a direct advantage in rare cases (e.g. in the case of capital increases). The effects are more in the image advantage for the company and the targeted influence by the fund management in the event of violations of the criteria.

There is a wide range of ethically sustainable funds with more or less strict criteria aimed at clients with different values; There are numerous environmental funds in German-speaking countries, but other areas of focus are increasingly being considered in the offer, e.g. B. Funds with a development policy focus.

The best-in-class approach describes an investment strategy after the best in each industry, category or class - based on ESG criteria - are selected. This is used in many, but not all, funds, and repeatedly meets with criticism because it includes industries and sectors whose ecological, sustainable and ethical character is controversial, such as the Japanese energy group TEPCO , which was part of the Dow Jones until May 2011 Sustainability Index was.

Another point of criticism: It is difficult to assess companies / issuers from the outside, as internal processes, cash flows and goods cycles are difficult to analyze. An assessment of sustainability , ethics and social compatibility must be based on self-reports, public business figures and company reports. It is supplemented by providers of fund databases or research results on individual stocks by non-governmental organizations (NGOs), which assess the relevant information for investors. However, this does not completely solve the transparency problem. There are now a number of transparency offers on the Internet. In a survey, 87 percent of DAX companies stated that their reputation was the main motive for sustainability management.

With careful selection, however, ethically sustainable investment funds offer an opportunity to take your own values ​​into account when investing.

Invest in publicly traded stocks of sustainable companies

The investor buys exchange-traded shares of companies through his bank whose corporate purpose, goals and business conduct correspond to his ideas of sustainability (economic, social, ecological sustainability). Investors can research such companies themselves and / or use the well-known sustainability indices such as the Natur-Aktien-Index (NAI) or the eco-share index nx-25 as a guide.

Continuing education at universities

In Switzerland, two universities offer a certificate course for investment advisors from banks and investment specialists on the subject of "Sustainable Investments".

See also

literature

  • Manfred Stüttgen: Investing ethically. Chances and Limits of Morally Justified Investments (= Gerhard Droesser and Ruth Hutzel [Ed.]: Moderne, Cultures, Relations . Volume 17 ). 2nd, revised edition. Peter Lang, Frankfurt a. M. 2017, ISBN 978-3-631-65180-3 .
  • Oliver Foltin: Methods of evaluating and measuring the sustainability of ethical, social and ecological capital investments . Metropolis, Marburg 2014, ISBN 978-3-7316-1064-9 (dissertation).
  • Scientific working group for universal church tasks of the German Bishops' Conference (Hrsg.): Changing the world with investments? A guide to ethical investment . Bonn 2010, ISBN 978-3-940137-33-3 ( dbk.de [PDF; accessed on April 6, 2010]).
  • Cengiz, CB, Braun, D., von Nitzsch, R .: Alpha vehicle or price for a clear conscience? A performance analysis of ethical investments . In: CORPORATE FINANCE biz . April 2010, p. 263-271 .
  • Klaus Gabriel, Markus Schlagnitweit: The good money. Ethical investment. Background and possibilities . Tyrolia-Verlag, Innsbruck-Vienna 2009, ISBN 978-3-7022-3026-5 .
  • Martin Faust, Stefan Scholz (ed.): Sustainable investments - products, strategies and advisory concepts . Frankfurt School Verlag, Frankfurt a. M. 2008, ISBN 978-3-937519-93-7 .
  • Klaus Gabriel: Sustainability on the financial market - shaping the economy with ecologically and socially responsible investments . Oekom Verlag, Munich 2007, ISBN 978-3-86581-083-0 .
  • Karl-Heinz Brodbeck: Profit and Morality - Contributions to the ethics of the financial markets . Shaker Verlag , Aachen 2006, ISBN 3-8322-4978-8 .
  • Wolfgang Kessler, Antje Schneeweiß: Money and conscience: do good and earn money from it . Publik-Forum , Oberursel 2004, ISBN 3-88095-139-X .
  • Antje Schneeweiß: Course book on ethical investment . Fischer, Frankfurt a. M. 2002, ISBN 3-596-15269-0 .
  • Martin Faust, Stefan Scholz: Sustainable investments: Products, strategies and consulting concepts , ISBN 3-937519-93-9
  • Forum Sustainable Investments eV (Ed.): Market Report Sustainable Investments 2018 - Germany, Austria and Switzerland . Self-published, Berlin 2018 ( forum-ng.org [PDF; accessed on March 23, 2019]).
  • Guide to ethically-sustainable investments in the Protestant Church, EKD-Text 113, 3rd, updated edition, September 2016

Web links

Individual evidence

  1. ↑ Mechthild Upgang: Profit with meaning. How to invest your money safely - with a clear conscience. Munich 2009, p. 38.
  2. ↑ Miriam von Wallis and Christian Klein: Ethical requirement and financial interest: a literature review on socially responsible investing . In: Business Research . tape 8 , no. 1 , August 2015, p. 61–98 , doi : 10.1007 / s40685-014-0015-7 (review article, Open Access).
  3. ^ Céline Louche, Daniel Arenas and Katinka van Cranenburgh: From Preaching to Investing. Attitudes of Religious Organizations Towards Responsible Investment. In: Journal of Business Ethics (2012) 110, pp. 301f.
  4. ↑ Upgang, Mechthild: Profit with meaning. How to invest your money safely - with a clear conscience , Munich 2009, p. 67.
  5. ↑ 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 .
  6. ↑ a b c Cedric E. Dawkins, Elevating the Role of Divestment in Socially Responsible Investing . In: Journal of Business Ethics . October 2016, doi : 10.1007 / s10551-016-3356-7 .
  7. ↑ Eurosif: Eurosif Study 2018. In: www.eurosif.org. Eurosif, 2018, accessed October 12, 2019 .
  8. ↑ Globals Sustainable Investment Alliance: Newsletter. In: www.gsi-alliance.org. Globals Sustainable Investment Alliance, May 2019, accessed October 12, 2019 .
  9. ↑ Principles for Responsible Investment: Principles for Responsible Investment Annual Report 2019. In: Annual Report 2019. Principles for Responsible Investment, 2019, accessed on October 12, 2019 .
  10. ↑ European Fund and Asset Management Association: EFAMA opinion on ESG fund ratings and labels. European Fund and Asset Management Association (EFAMA), June 9, 2017, accessed October 12, 2019 .
  11. ^ High-Level Expert Group on Sustainable Finance: Financing a Sustainable European Economy. In: www.ec.europa.eu. European Commission, October 28, 2016, accessed on October 12, 2019 .
  12. ↑ Eurosif: Eurosif Study 2018. In: www.eurosif.org. Eurosif, 2018, p. 12 , accessed on October 12, 2019 .
  13. ↑ Antje Schneeweiß; Course book on ethical investment ; Fischer-Verlag Frankfurt a. M., 2002
  14. ↑ Michael Schäfer: Conflict-laden investments: Detective in your own portfolio . In: Neue Zürcher Zeitung . 2015, ISSN  0376-6829 ( nzz.ch [accessed on February 2, 2017] The NZZ article shows challenges in the practical implementation of sustainable investments by private investors.).
  15. ↑ “Sustainable” is also an educational topic . In: Finance and Economy . ( fuw.ch [accessed on February 2, 2017]).
  16. ↑ EKD Church Investment Working Group: Guide for ethically-sustainable investments in the Protestant Church. Church Office of the EKD, 2016, accessed on October 16, 2019 .