ESG funds in Germany break the €100 billion mark

The ESG fund market in Germany is growing dynamically: the assets invested in sustainable funds have now exceeded the $118.4 billion (€100 billion) mark. Approximately half of this is in mutual funds.

Also the new business increased strongly. In the first half of 2020, sustainable funds registered $8.5 billion (€7.2 billion) according to the BVI. Of this amount, sustainable mutual funds alone contributed $9.12 billion (€7.7 billion). Compared with the first half of 2019, this represents an increase of 160 percent. At the same time, $4 billion (€3.4 billion) flowed out of non-sustainable funds.

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A partial result of a BVI study on sustainability funds

The “Guidelines for Responsible Investing” formulated in the BVI as early as 2012 have set in motion a development in the industry that is now producing impressive results: Today, over 96 percent of the securities fund portfolio is managed by BVI members who apply the United Nations Principles for Responsible Investment (UN PRI).

An analysis of selected mature ESG markets in the EU based on Morningstar data also shows that some countries appear to have stricter standards for their sustainable funds than others. For example, only Germany, Sweden, and Norway have funds that invest while applying the exclusion criteria such as nuclear power, coal, outlawed weapons, tobacco, and serious violations of the UN PRI. The Netherlands, France, and England, on the other hand, do not have such sustainability funds. This is the partial result of a BVI study that will be published soon.

In Germany, the trend towards ESG is unbroken

“The trend towards sustainable investments is unbroken in Germany. So that this remains in such a way, we advocate for regulation, which strengthens this development instead of weakening it, said Thomas Richter, General Manager of the German fund federation BVI. 

“Sustainability regulation must create clear standards.” A stubborn adherence to the timetable of the disclosure regulation could therefore not exist from the view of the BVI. Richter continued: “The market players in some EU member states seem to believe that they can agree with the supervisors on a “comply or ex-plain” approach and provide investors with only parts of information. This is not our legal understanding, it prevents a level playing field within the EU and it confuses investors.” 

Funds must provide information about ESG

By the time the ordinance comes into force on March 10th, 2021, funds must include templates for information on sustainability in their sales prospectuses. The templates will be developed by the ESAs and will be available by the end of January 2021 at the earliest. 

The fund companies have just five weeks to adjust the investor information. In order to establish uniform standards across Europe, the BVI calls for the start of the disclosure regulation to be postponed to the beginning of 2022. That request is  also in order to enable synchronization with the entry into force of further taxonomy information obligations and not to hinder the sale of the products.

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(Featured image by Demiahl via Pixabay)

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