Frankfurt am Main The 13th Annual Conference „Sustainable Investment“ of the Frankfurt School Verlag, which took place on 16 September 2020 at the Frankfurt School of Finance & Management, was dominated by the corona pandemic – which was already visible in the „hybrid“ event format, which is popular everywhere, with 80 participants on site and a further 60 online participants. As expected, the influence of the corona pandemic on sustainable investment was also one of the central themes of the event. The programme focused on the progress of regulation, sustainable bonds and, time and again, the impact of sustainable investments.
From niche topic to growth driver
Last year there was talk of the „beginning of a cultural change“, but since then the topic has clearly gained momentum. Ulrich Martin, Head of Conferences and Marketing at Frankfurt School Verlag, also emphasised in his welcome address the transformation of sustainable investment „from niche topic to growth driver“. The market report by Angela McClellan, Managing Director of the co-organising Forum Nachhaltige Geldanlagen e.V. (FNG), made the development clear with some figures: The share of explicitly sustainable investments in Germany increased by around 37% last year. Although this still only means a share of 5.4% of the total market, 95% of all funds and mandates available in Germany already use a combination of exclusion criteria and standards-based screening. And while the topic has long since become more and more mainstream among institutional investors, private investors are now also discovering sustainable investment: last year the growth rate there was 96%! Not least due to regulation, responsible investing will soon become mainstream throughout the industry. Future milestones are quality assurance and impact measurement, McClellan said. Prof. Dr. Martin Faust from the Finance Department of the Frankfurt School of Finance & Management as moderator then posed a central question on the conference topics: „Will 2020 be the year of sustainable transformation?
Impact and regulation
Tanja Gönner, spokeswoman of the board of the German Association for International Cooperation (GIZ), opened the discussion on the first key topic „Impact“ with her keynote speech on enabling sustainable investments and measuring their impact. The central message: „The public sector cannot cope with all of this on its own; the private sector and especially the financial sector is also called upon here,“ said Gönner. The definition of concrete impact targets and their internal and external validation is central to this. The Sustainable Development Goals (SDGs) of the United Nations have emerged as the central criteria for this, as Florian Sommer, Head of ESG Strategy at Union Investment, also explained in his presentation. He was also able to show that corporate investments with an impact can also be financially worthwhile, but that there is still a long way to go. Of the 74 trillion US dollars of assets under management worldwide, around 30 trillion are currently based on ESG criteria, but only 500 billion are real impact investments in the sense of SDGs. Regulation would play an important role here, but it should not overshoot the mark. Dr. Markus Lange, partner at PwC, then pointed out the different regulatory efforts: from EU taxonomy to the EU Green Deal, the disclosure regulation and the preferential treatment under MiFID.
To conclude the first block of the conference, moderator Faust:
„It all starts in the mind, conflicting interests and goals have to be reconciled“.
Sustainable Bonds and Foundation Strategies
In the second major block of the event, the discussion finally focused on sustainable bonds, which are becoming increasingly important. First Tim Junghans, Managing Director of finpair GmbH, spoke about the trend of green finance in traditional corporate financing, Christian Wellner, Head of Strategy at the German Federal Finance Agency reported on the issue of twin bonds, i.e. the parallel issue of conventional federal bonds and a „green“ counterpart, and Sebastian Dusch, City Treasurer of the City of Munich, demonstrated the benefits of issuing municipal bonds as social bonds. The subsequent discussion, in which Axel Wilhelm, head of imug Rating, also took part, focused on the role of sustainable bonds for issuers and investors. He said that external rating – the second party opinion – played an important role in this context, which is why renowned rating agencies are generally relied upon. However, the conclusion of the round was: „The investors are already much further than many people think!
On the subject of foundations and their investment strategies, Frederic Hoogveld, Head of Investment Specialists, Index and Smart Beta at Amundi, first explained the effects of EU regulation on the development of passive investment solutions for foundation investors. Subsequently, Ann-Grit Lehmann, Head of Finance of the Foundation „Remembrance, Responsibility and Future“ concluded the morning with a keynote on current trends and developments in this investor segment. Of central importance at present is the further development of investment strategies away from black to white listing and the carbon management of investments. Ultimately, Lehman said, however, each institutional investor – depending on the respective stakeholders – defines individually what he wants to focus on.
Impact is the order of the day
As usual, the afternoon was characterised by two parallel series of lectures on the different product solutions of various asset managers in implementing sustainability in their portfolios. The topics ranged from the composition of Inidices to the question of impact investing with bond ETFs and the SDG impact of investments in renewable energies. A presentation on ESG integration in infrastructure investments by Susanne Reisch, Senior Portfolio Manager at Bantleon, concluded the programme. In his concluding remarks, Prof. Dr. Martin Faust from the Frankfurt School again emphasised the central importance of regulatory efforts and the insight from the presentations that Corona had provided important impulses for sustainable investment. However, the whole day was more or less explicitly focused on one topic – the question of the impact of sustainable investments. According to this, in the case of Sustainable Investment 2020, the impact of their investments for a sustainable future is increasingly driving the asset management industry and investors alike. A big step in cultural change.
By Dr Andreas Jaensch for FMF