ESG without greenwashing
Luxembourg, 07 April 2020 - Commentary by Sabine Said, Executive Vice President of Moventum S.C.A.
Sustainability is more than a hot topic even in the times of the corona crisis. After the pandemic, the focus will be on building up the economy in a responsible manner. An ever larger number of investors attach great importance to investing their money sustainably. Soon, the orienting towards ESG topics will be part of everyday life in the financial sector. Meanwhile, it is important not to be dazzled by short-term offerings that are geared towards maximising revenue while at the same time providing advisors with ESG-compliant investments – which also entail long-term benefits.
The topic of sustainability is being driven by the large demographic group of Millennials and Generation X, who are sensitive to climate change and are calling for a genuine shift in thinking. In almost all areas of life, environmental awareness has already increased. Additionally, the financial sector is also heavily influenced by the EU Commission, which, as part of its Sustainable Finance Initiative, intends to make the entire economy more sustainable. And this is where the financial sector has a huge impact. If not enough or no capital flows into certain sectors, for instance the coal industry, the pressure to make real changes is increasing. Channelling the flow of money into financing sustainable growth is the EU’s objective – and it is being tackled with determination.
In the meantime, proposals have been made as to what should be regulated and how. While not yet final, many things already seem very likely. For example, there will be a uniform EU taxonomy, a guide to classifications according to set criteria. The aim is to create uniform standards for assessing economic behaviour. Companies will be classified as sustainable if they contribute to the six sustainability goals defined by the EU, do not cause significant damage in any of the areas and comply with minimum social standards.
On the one hand, this relates to the financial companies themselves. Everyone is responsible for how to deal with the issue of sustainability. On the other hand, it also affects the investments made by financial companies. And this is most certainly the more important and difficult part. Since the ideas have not yet been transposed into legislation, there are many outstanding issues. For example, there are still no clear rules on which products may be considered sustainable, and there is a great deal of overlap between the various sustainability ratings. One thing is already clear, though: non-sustainable products are supposed to be labelled in the future.
It is a fact that advisors are increasingly demanding sustainable financial products for their clients. Up until recently, the initiative was mainly taken by clients, while today quite often advisors are the ones recommending these products. After all, an increasing number of studies show that sustainable investments also offer higher returns. And as always: wherever there is a great demand, there will also be a large and diverse offering.
In addition to the pioneers of sustainable investments, ever more other companies are entering the market with new, sustainable products. The question is whether these products are actually always as sustainable according to independent standards as marketing would have us believe. Sometimes it is simply a matter of greenwashing, with existing products being re-labelled as sustainable products. This makes it all the more important for independent sustainability certifications and seals focusing on ESG or, for instance, exclusively on ecological aspects to be awarded to investment funds to provide guidance both for advisors and investors alike. Transparency and comparability are more important than ever for successful advice.
When really wanting to invest sustainably, the focus needs to be placed on verified providers. They are very familiar with the subject matter and have frequently developed their own investment universes, which are often stricter than the EU taxonomy is expected to be. Selecting such providers for their clients will enable them to enjoy both sustainable returns and a real green conscience in the years to come.
As an independent financial service partner, Moventum S.C.A. is specifically addressing financial service providers such as financial advisors, asset managers, institutional investors and NGOs. Its services in asset management and asset building include a web-based securities investment platform focusing on funds, relieving financial advisors of administrative tasks, and integrating custody and account management for individual investors. Investment management tools, regulatory-compliant reporting and individual securities services are also part of the full-service range. Standardised fund asset management service with a sustainable, successful track record for the relevant risk/reward profiles complements the offering. The Moventum Group also enables institutional investors to outsource securities processing in its entirety. The MoventumOffice investment platform offers access to more than 9,000 investment products including funds and ETFs from more than 400 investment firms, including the use of analysis, reporting and support tools.
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