The days when sustainable investments meant high risks or low returns are over. Socially and environmentally conscious investing is winning more and more followers. The coronavirus crisis has accelerated the trend even further.
Coronavirus has changed the way we look at important aspects of our lives. Many people are now convinced that after the pandemic we shouldn't simply carry on as before. A fresh start in the economy, they argue, should lead us to act more sustainably. Investing offers one way to drive this change forward. Because when more and more investors favor shares in companies or funds that do business and invest responsibly and sustainably, that will in turn influence the decisions made within those companies.
In fact, the growing interest in sustainable investments can already be observed in the market. The world's leading asset manager, BlackRock, which also owns the ETF provider iShares, reported that sustainable ETFs in its iShares suite had already attracted eleven billion US dollars in 2020. That is a little more than double the inflows of five billion US dollars for the whole of 2019. "Sustainable strategies outperformed in the most recent downturn and continue to attract capital," iShares says.
Investors are investing sustainably
The trend is also evident in Germany: a representative study conducted for Quirin Privatbank in June 2020 by the market research institute Puls comes to the following conclusion: for two-thirds of respondents, sustainability will become more important in every area of life in the future. 18% of respondents said they also wanted to pay attention to sustainability when investing. While today, on average, just under ten percent of investments are already held in sustainable products, respondents said that by 2025 they wanted to have a quarter of their invested capital in sustainable products.
With quirion, the step toward sustainable investing takes just a few clicks. Since December 2019, the digital investment service has offered, alongside the global portfolio for building wealth or saving for retirement, a sustainability portfolio as well. "Since the start of the year, 30% of our new clients have opted for the sustainable portfolio," reports Anselm Hüwe, senior analyst at quirion. "Demand is pleasingly strong."
Sustainability with no compromise on risk and return
"Other providers have recognized the trend too and are now jumping on board," Hüwe has observed. But quirion's offering differs from that of other providers in some crucial respects: "When it comes to sustainability, we don't go to extremes, for example by investing only in a handful of companies or only in wind farms," says Hüwe. "As in our other portfolios, we offer broad diversification and risk spreading. That means our clients can invest their entire wealth in the sustainable portfolio without taking on unwanted risks or giving up returns."
In fact, at quirion the sustainable portfolio even performed somewhat better than the global one during the coronavirus crisis. One reason for this difference is that sustainable companies were often less affected by the crisis, or even benefited from it, such as the IT sector. Crisis losers such as oil majors or the airline and cruise industries, on the other hand, are less well represented in sustainable indices.
A broadly diversified portfolio
3,000 companies make up the sustainable portfolio. "Our sustainability portfolio has a global focus. In it, we also draw on value stocks, that is, low-valued securities with strong earnings power," explains Anselm Hüwe. "At first glance that sounds like a contradiction, because traditionally these are often industrial stocks with high CO2 emissions. But we filter such stocks out." To select the products, quirion draws on Quirin Privatbank's many years of experience in order to meet its own high standards for sustainability and diversification. "Our goal is to achieve a balanced portfolio that mirrors the entire global economy," explains Anselm Hüwe. "In doing so, we aim for a balance between sustainability and performance."
Clear selection criteria
In the sustainability portfolio, too, quirion offers cost-effective ETFs and index-tracking funds. To reduce risk, quirion focuses on broad diversification. The basis for selecting each fund is the ESG scores of the companies it holds. ESG stands for Environment, Social and Governance, the three dimensions in which sustainability is measured.
- Environment: protecting the environment and using resources responsibly
- Social: safeguarding peace, human rights and good working conditions
- Governance: ensuring corporate responsibility toward society
The result is strategies that combine responsibility with the potential for returns. To achieve broad diversification, quirion takes all sectors into account and selects the best ETFs for diversified market coverage. The exception: manufacturers of cluster munitions, landmines and nuclear weapons are completely excluded, as are companies that violate the United Nations Global Compact. Under the Global Compact, many companies have committed to upholding ten ethical, social and environmental minimum standards. These include, among other things: respect for human rights, allowing trade unions, refraining from forced and child labor, and taking a stand against corruption.
With these selection criteria, quirion delivers an optimized carbon footprint and better ESG scores compared with the global equity market, and it does so with the worldwide diversification that is typical of quirion.
Does this speak to you too? Learn more about our sustainability portfolio and how you can invest responsibly with ease, without high costs, without unwanted risks, and without having to give up returns.
