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01 Dec 2021, 14:02
Benjamin Wehrmann

Most 'sustainable funds' in Germany amount to little more than greenwashing – NGO

Clean Energy Wire

Most of the money put into so-called sustainable funds in Germany is not invested in projects that differ significantly from conventional investment funds, NGO Finanzwende has found in an analysis. “The result is a devastating evaluation of the green investment boom,” the NGO said. Investors seeking to put their capital into climate-friendly activities are potentially being led astray by the fast-growing investment vehicles, as many of the funds promoted as sustainable do not abide by the ESG (environmental, social, governance) principles for sustainable finance, the NGO said. The analysed funds included shares in fossil fuel companies such as Shell, ExxonMobile and Total, or stakes in businesses criticised for their working conditions, such as Amazon, or even in the scandal-ridden German digital banking company Wirecard. “The big promise of many green funds to do good for other people and the environment often does not amount to more than greenwashing,” said Magdalen Senn of Finanzwende.

In a sustainability fund managed by the investment branch of public banking group Sparkassen, Deka Investment, the top 10 positions did not differ from its conventional counterpart in May 2021 , the NGO found. Only a strict European standard that sets a common definition for sustainability in investments could remedy the situation, Senn argued. The volume of capital put into exchange traded funds (ETFs) and public funds labelled as sustainable has doubled over the past two years, which led the NGO to look into more than 300 funds with a combined volume of 100 billion euros currently offered in Germany. The funds habitually do not exclude “particularly problematic companies,” nor do they shun damaging or controversial sectors. Up to 70 percent of energy investments in these funds are put into fossil energy projects, including 100 million euros invested in coal power. However, Finanzwende stressed that truly sustainable funds do exist and that investors can make sure their money is going into environmentally and socially acceptable projects, even if many offers do not merit the label.

Aligning the financial sector with climate policy and emissions reduction targets has been a key promise of the outgoing German government under acting finance minister and chancellor candidate Olaf Scholz (SPD). In a bid to catch up with other countries that have already embarked on a transformation of their financial sector, Germany launched a sustainable finance strategy in 2020. Many banks and financial market actors in the country promised to gradually green their investment portfolios and promote more sustainable projects, which still account for only a fraction of all investments in Germany. The highly-anticipated EU taxonomy on sustainable finance is supposed to bring more clarity regarding sustainable investment standards but is currently held up due to a debate led by Germany and France over the sustainability of natural gas and nuclear power investments, respectively.

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