Sustainable investment is a booming topic and a growing market. A few years ago a niche topic, ESG criteria seemed to be the focus of large fund companies. After all, it has been sufficiently proven that investors do not have to accept a loss of return with ecological investments.
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ESG criteria for investment companies – is it all just marketing?
Companies often report on specific sustainability approaches and in-house ESG research teams. But how sustainable do the big investment companies really operate? The charity ShareAction comes to a different conclusion in a study. A total of 75 investment companies or the corresponding portfolios were examined in the following areas: anchoring sustainable investments, climate change, human rights and biodiversity.
ShareAction had found that there was still a lot of catching up to do. Not a single provider had been given the highest rating (AAA = “gold standard”). The five companies with the highest ratings could be found at the third-highest level “A”. The Dutch fund company Robeco has been in the first place, the major French bank BNP Paribas in second place. According to the study’s findings, European asset managers have done considerably better than American ones.
The long-term approach to fund savings plans pays off
Investment results of equity fund savings plans are positive despite the sudden slump in stock market prices in the months of February and March, depending on the term – an analysis by the BVI industry association has shown this. According to the analysis, the longer the investment periods, the less impact the stock market turbulence of recent months had.
In its publication, the BVI cited globally investing equity funds as an example: In this group, the average savings plan return over 10 years would have been 3.3% annually on average, and over 30 years 5.7% annually (as of the end of March 2020).
From the point of view of the industry association, the results showed that with regard to old-age provision it makes sense to invest part of the savings in equity funds. The broad diversification in shares of companies in different sectors and regions and the longest possible investment period would significantly reduce the risk of getting back less than the contributions paid in.
Open-ended real estate funds: increasing proportion of investment properties in Germany
The proportion of properties from Germany in open-ended real estate funds has increased in 2019. This was announced by the Scope analysis company in a publication. The weighting had increased from 39% in 2018 to 45% in 2019. At the same time, the share of US real estate had fallen dramatically from 12.6% (2018) to 3%. Scope explained this decline in investment with high costs for currency hedging.
Office properties were the most popular, with 60.9% in 2019 despite a slight decline (68.7% in 2018). Despite the relatively low share of residential real estate, “the purchasing dynamics have increased abruptly.” A large part of this was accounted for by the segment of student housing. Retail and hotel properties, on the other hand, had received less attention.
MiFID-II: Fund associations for adjustments
Cost transparency and consumer protection for investors were the declared objectives when the EU authorities declared the directives for harmonising the financial markets in the European internal market (MiFIR or MiFID II). The EU Commission had repeatedly adapted these regulations.
Currently, the German industry association BVI and its French counterpart AFG are demanding further adjustments. The associations have stated, for example, that “with the new regulations, passing on the costs of analyses to customers” has become very complicated.
Due to the regulations, many asset managers had decided to pay the research costs themselves and not to charge them to the fund assets. In this context, the industry associations had called on the EU authorities to have the regulations reviewed by the authorities. In their view, it is important how research costs are actually distributed. It must be ensured that small caps are covered and that bond research is excluded.
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First published in FondsDISCOUNT.de, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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