Green investments: even more “greenwashing” in funds?

From: 13/06/2022 16:41

It appears that the US Securities and Exchange Commission is investigating the “green” funds of investment bank Goldman Sachs. Deutsche Bank’s fund subsidiary DWS was previously targeted by authorities. What does this mean for investors and the industry?

By Bianca von der Au,

The head of the powerful US investment bank Goldman Sachs has made climate protection a priority. In late 2019, David Solomon complained in a “Financial Times” article that companies had treated sustainability as a secondary issue. The manager called on companies, banks and governments to do more. Sustainability is now a topic that can also be used to earn money. For example, with special funds that invest investor money according to social, ethical and ecological standards. Leading US bank Goldman Sachs has set up so-called sustainability funds, but they may not invest as sustainably as the name promises.

According to the Wall Street Journal, the US Securities and Exchange Commission is investigating several Goldman Sachs funds more closely. These are funds that have in their name the terms “clean energy” or ESG – an acronym for socio-ecological investment criteria. Neither the US Securities and Exchange Commission nor Goldman Sachs commented on the allegations. According to US media, however, people familiar with the case have confirmed that at least two funds are under investigation.

Rename old funds?

According to the report, the investigation specifically concerns a blue chip equity fund called “Blue Chip Funds”, which Goldman Sachs renamed “US Equity ESG Funds” in June 2020. However, the fund’s largest holdings – Microsoft, Apple and Alphabet – remained the same. It is a relatively small fund with $ 17.8 million in assets under management.

However, the case could have a major impact on the entire industry if the greenwashing allegation turns out to be true, says Christiane Hölz ​​of the German Securities Association, or DSW for short. “Just as Dieselgate has hurt the entire auto industry, so-called greenwashing could become a big problem for fund providers.” First of all, the presumption of innocence applies.

Raid in Frankfurt

It is not just in the United States that banks are accused of marketing sustainable financial products that are less green than they appear. In early June, police and prosecutors conducted searches at Deutsche Bank and its fund company DWS. DWS boss Asoka Wörmann stepped down shortly after. The subsidiary of the Deutsche Bank fund has been suspected of greenwashing since last summer. A former sustainability manager raised the charge against her old employer. Since then, the German and US authorities have been investigating.

Reliable data is lacking

Shareholder protector Hölz ​​sees a difficult situation overall, even for investors who want their money to be invested sustainably – in terms of social or environmental standards: “It’s always a question: what do I mean by sustainability? ? It would be nice if we could rely on the label, but that’s not always the case in other areas as well. “

But according to Christiane Hölz, even fund companies have problems meeting sustainability criteria. Especially since fund managers and advisors have to inquire about clients’ sustainability wishes from August onwards, this is what the law wants. However, according to the CEO of DSW, many companies lack data to provide information on environmental balance, good corporate governance or social issues. The corridor for companies that are already “green” is also very narrow. “Of course, private investors are also interested in generating a return,” said Hölz

What are the US tech giants doing?

This is probably the main reason why high-growth US tech companies often make up the largest share in so-called sustainability funds. Magdalena Senn of the city movement Finanzwende is not surprised. Your assessments have shown that conventional funds often do not differ much from “green” investments. It is therefore important to form your own idea of ​​sustainability. “For example, if it is important for you to exclude child labor and weapons from your investments, or if you want to make targeted investments in green transformation and the energy transition.”

It is also important that both experts advise investors to look at small print. “Then sometimes you discover an oil company and you can then decide for yourself how sustainable you actually find it,” says Senn.

“An important step”

The financial turnaround expert also assumes the ongoing investigations will have an impact: “The fact that the fund industry’s promises are scrutinized more closely by the financial regulator in America and Europe is an important step. Above all. that look at misleading promises. ”So far, everyone has set their own standards. The situation is likely to change further at the latest with the introduction of new EU rules for valuing financial products since the beginning of the year. The financial sector is also in a state of turmoil and it appears regulators are taking a closer look when it comes to sustainability.

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