Where the returns are green

There are more and more sustainable funds in Europe. The fund company decides what is ethically correct. Therefore, investors should keep a few things in mind.

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Se learn in elementary school that certain adjectives cannot be increased. In the fund industry, however, the following has recently been applied: green, greener, greenest. Neither companies nor fund companies can ignore the topic of sustainability, and so more and more asset managers are outbidding each other with new, ethically correct forms of investment. For many investors it is therefore becoming increasingly difficult to distinguish between what really counts as a sustainable investment and what is supposed to be “greenwashing”, ie a kind of green paint so that the fund sells better. In addition, the question arises for investors as to how profitable such investments really are or whether they have to fear a loss of returns.

According to the Scope rating agency, there are currently 824 sustainable funds in Germany that are approved for sale. Compared to last year, the number rose by 278 funds. According to information from the fund analysis company Morningstar, it was even 2170 across Europe by the end of July this year. “The market is moving rapidly,” says Ali Masarwah from Morningstar and sees a huge trend. This year alone, around 330 billion euros were invested in ESG funds by the end of July. The abbreviation ESG stands for environment, social and corporate governance – dimensions for sustainability. That is a “gigantic” dimension, also in comparison to the total amount of money that has flowed into the European fund market. After all, the inflows into sustainable investments accounted for more than 40 percent of all funds inflows.