What contribution sustainable investments can make?
Investments always have a value and are never neutral. Investing always means making a decision. If one buys a product, for instance, that contains components harmful to the environment or that was manufactured under unfair working conditions, then one more or less directly “supports” environmental and social abuses. And vice-versa. That which applies for everyday consumption patterns has the same significance when you allocate capital as an investor.
Investing in a better world
An example from the area of environmental protection shows how capital-intensive the transformation to a liveable world is. In Austria, researchers from the Graz-based Wegener Center recently calculated that the Austrian goal of being climate neutral by 2040 means having to make corresponding investments of at least EUR 4 billion per year. In Germany, the EU member state with by far the most emissions of greenhouse gases, the projected figure according to the Net-zero Germany study by consulting firm McKinsey is EUR 6 trillion by 2045. About EUR 240 billion would have to be invested in green technologies and infrastructure alone. These are topics that are also highlighted as part of the Zukunfts-Thema ‘energy’ at Raiffeisen KAG.
However, another thing is also clear according to experts: Not investing would prove to be even more expensive. A report from the Intergovernmental Panel on Climate Change (IPCC) estimates that the costs of climate change will amount to around EUR 14 trillion in the year 2050 due to the loss of ecosystems – this would be around 7% of global GDP. The pure damage to the climate cannot be viewed in isolation as it changes the lives of societies in an all-encompassing manner. Providing for basic needs such as food and shelter will be affected by the climate crisis, which drives up the costs for these.
Targeted change to sustainability
The fact is that the change to sustainability costs money in every aspect and requires targeted investments. When investing, one can ask the same critical question as when consuming: Where does my money go? The financial market has a number of options available for you in the segment of sustainable investments (Sustainability criteria). These range from funds which do not invest in certain sectors and business models (such as coal, weapons, child labour, and environmental destruction) on the basis of defined criteria and by taking essential ‘Zukunfts-Themen’ into account, to funds which only have pioneers in sustainability in their portfolio. The common denominator among these sustainable investment funds is that the companies they contain are not only critically assessed on the basis of financial indicators, but also in particular with regard to social and environmental risk factors (ESG: three letters, one sustainability approach).
Where money can support sustainability
But can the differences to traditional investments in terms of sustainability be measured in specific figures? Let us examine, for instance, a mixture of five sustainable Raiffeisen funds and fund segments. If one compares the companies in these funds to the overall market, then the result is as follows (source: Raiffeisen KAG, data as of 30 June 2023):
39% less CO2 emissions
97% less waste
88% less water consumption
22% fewer work accidents
How the comparison was made
This comparison is valid for the following funds and fund segments: Raiffeisen-Nachhaltigkeit-Aktien, Raiffeisen-Nachhaltigkeit Solide (equities segment), Raiffeisen-Nachhaltigkeit Mix (equities segment), Raiffeisen-Nachhaltigkeit Wachstum (equities segment), Klassik Nachhaltigkeit Mix (equities segment). In order to calculate the impact of these sustainability funds, company indicators were taken from their sustainability reports and multiplied with their weighting in the fund and in the overall market.
Financial investments with a sustainable impact …
Managing sustainable funds actively and responsibly means exercising voting rights (for instance, during annual general meetings). Fund companies pool money from numerous investors – and consequently they also pool shareholders’ voting rights (see: The integrative sustainability concept of Raiffeisen Capital Management. The large amounts come with a certain influence. For example, fund managers can exert pressure on companies at their annual general meeting to transform towards greater sustainability in the future. In this way, making regular contributions to a fund-based savings plan can also support lasting change for the better. To see which companies Raiffeisen KAG engaged with last year, please consult the engagement report.
… and greater transparency
Conventional investment decisions are often based solely on commercial factors and financial indicators. However, by taking into account sustainability criteria and sustainable ‘Zukunfts-Themen’, investors can get a more comprehensive picture of a company. What social and environmental risk factors affect the company? What measures does it take in response? Therefore, the risk analyses for sustainable investments generally go into even greater detail.
Impetus to promote sustainability
The idea of also taking into account sustainability aspects when investing is becoming more and more popular. The market for ethical, environment-friendly, and sustainability-oriented capital investments has been experiencing an impressive boom in recent years. This can also be seen by the fact that more and more companies are publishing detailed sustainability reports so as to remain attractive for the financial market. So deciding in favour of sustainability-oriented capital investments can create an important impetus for the promotion of sustainable business practices. In much the same way as consumers wield market power, each and every one of us is able to achieve a specific impact with our financial flows.
The funds Raiffeisen-Nachhaltigkeit-Aktien and Raiffeisen-Nachhaltigkeit-Wachstum exhibit elevated volatility, meaning that unit prices can move significantly higher or lower in short periods of time, and it is not possible to rule out loss of capital. The Fund Regulations of the Klassik Nachhaltigkeit Mix have been approved by the FMA. The Klassik Nachhaltigkeit Mix may invest more than 35 % of the fund's volume in securities/money market instruments of the following issuers: Austria, Germany, France, Netherlands, Belgium, Finland.