Frankfurt From Tuesday, the EU will oblige investment advisors to ask every customer how they would like to keep their portfolio in terms of sustainability. This is an opportunity – for the industry and for responsible investors.
But the bumpy start without clear guidelines for the consultants can only damage the complicated topic. However, this again puts the credibility of the financial sector at risk, which has to prove that it takes its lofty goals seriously and is able to implement them.
Basically, it’s good that we can now use our investment capital to promote environmental protection, social criteria and principles of good corporate governance with the help of financial advisors; summarized in the abbreviation ESG. But the question remains whether the new concept with three apparently simple questions really contributes to this.
Because if an investor answers the first question “Do you want to consider sustainability in your portfolio strategy?” with “Yes”, he and his advisor immediately find themselves in a jungle. It consists of ambitious goals and at the same time vague guidelines from EU politicians.
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For example, the share of sustainable investments in funds should be specified, but it is unclear how exactly it should be calculated. The industry associations have translated this muddle into a concept that is certainly well-intentioned, but which promises no salvation from the thicket because it tries to take into account all the wishes from Brussels.
When it comes to the questions “What is sustainable for you?” and “How green should your financial product be?” the investor would have to have very specific ideas and answers.
If not, it gets even more complicated: The consultant then has to go through more bureaucratically defined concepts with the customer, such as the EU taxonomy on what is considered sustainable in terms of climate protection, or the criteria for the EU regulation on how Fund providers have to classify their products according to all three ESG goals.
However, it is questionable whether this will increase the already weak interest of private investors in the topic. If the consultation session then reveals that no suitable products exist at all for certain of these desired green worlds, then the topic is at the bottom.
Initial experiences from savings banks show that the new rules do not really serve the purpose. After the greenwashing debate, the discussion about the correct identification of sustainability funds, a more comprehensible approach to the topic would be helpful – also in terms of the credibility that has already been shaken.
More: Why the EU Parliament classifies natural gas and nuclear power as ecological