Sustainable investing

The definitions are often very personal and there are big differences between them. There are approaches that can confidently be referred to as greenwashing, and there are others that take purely social or ecological criteria into account. Whether the philosophy underlying an investment matches one’s own values is something that can only be ensured by asking specific questions about the conditions and background. This is also crucial from an economic point of view because it can currently be seen that many investment companies have taken advantage of the positive attitude of private investors, especially towards ecological investments. It is against this background that ECO123 aims to help readers to understand the basics.

First of all, I would like to deal with bank deposits. What actually happens to the money that you deposit in a straightforward savings account? The deposit is available for the bank to use. It works with the money. But what does that mean, “works with it”? The classic model of banking provides that money is received from savers and this money is made available in the form of loans to those who need it, for example for investments. But alongside this classic business model, today’s banks also work in other areas. And so, it is quite realistic to assume that your credit institution does not provide loans with the client deposits, but uses them for speculation in raw materials, currency and shares. Even if a credit institute does provide loans for the real economy, savers who think in terms of sustainability should always ask whom and what the bank is financing. Are armaments companies or firms producing genetically modified foodstuffs, those building nuclear power stations or whose supply chains are not free of child labour financed in this way? The question of the institute’s geographical makeup can also be interesting. Is it more regionally orientated, or internationally? Such questions should be answered in a company’s annual report or ideally in a sustainability report. Which brings me to the subject of transparency. A bank’s ownership structure can also allow certain conclusions to be drawn. Ideally, the interests of all participants are in harmony – those of the bank’s owners, (e.g. shareholders, members of a cooperative), those of employees and those of clients. All the points that have been mentioned also have an influence on the question of conditions. In the same way as organic foodstuffs have their price, a good banking service, which takes all the viewpoints into account that have been touched on, must also have its price. If interest rates on deposit accounts are unusually high, savers must ask whether these are justified in comparison with the rest of the market. If the interest rates are indeed higher than average, you must ask yourself why the bank offers such conditions. Is it running high risks when lending or investing, are the conditions being offered a marketing instrument as part of the bank’s strategy, or are products being subsidised by other services and products (shares, funds, insurance etc.)
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About the author

Marcus Pfingsten (37), Married with one daughter, has a degree in business and, since 2008, has been working in asset management for the cooperative GLS Bank,which belongs to the Global Alliance for Banking on Values (www.gabv.org). He brings information about ethically sustainable investments to the ECO123 investment guide: on renewable energy, ecological agriculture, healthy living etc. and green shares and fund companies.