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Finance professor criticizes "greenwashing": "Sustainable" investments are often only painted green

2022-03-29T10:23:05.865Z


Finance professor criticizes "greenwashing": "Sustainable" investments are often only painted green Created: 03/29/2022, 12:10 p.m By: Rolf Obertreis Private investors should be careful with sustainable products and take a close look. © Boris Roessler/dpa "Sustainable" or "green" financial products are becoming increasingly popular. Finance professor Michael Grote advises private investors to


Finance professor criticizes "greenwashing": "Sustainable" investments are often only painted green

Created: 03/29/2022, 12:10 p.m

By: Rolf Obertreis

Private investors should be careful with sustainable products and take a close look.

© Boris Roessler/dpa

"Sustainable" or "green" financial products are becoming increasingly popular.

Finance professor Michael Grote advises private investors to take a closer look.

Frankfurt – "Green" bonds and other "green" financial products do not live up to their promises and do nothing to protect the climate, says Michael Grote, a renowned professor at the private Frankfurt School of Finance and Management (FS).

Finance: Investing in 'green' bonds - Banks aren't about 'saving the world'

“Investing in green bonds may make us feel good.

But what happens to the money is unclear.

It's definitely not about reducing CO2 emissions."

Global warming is currently not being stopped via the capital market, and one should not rely on that.

"For banks, green financial products are primarily about additional business and not about saving the world," Grote criticized, among other things, statements by Deutsche Bank boss Christian Sewing.

According to the finance professor, seals of approval for supposedly green financial products are just as questionable as sustainability assessments by rating agencies.


Sustainable investments: Expert criticizes "greenwashing" by fund providers

In a joint study with the US finance scientist Matthew Zook, Grote examined the "green" financial market.

At first glance, it is a great success story.

At the end of 2020, 3.2 billion US dollars had been invested worldwide according to ESG criteria - ecology, social, governance - environment, social issues and good corporate governance.

There is real hype at banks, in the fund industry, at rating agencies and in politics.

The return on green bonds is hardly better than that on normal bonds.

The advantage is just 0.01 percentage points.

However, there are also other studies that attribute a yield advantage of 0.16 points to green bonds.


According to Grote, the financial industry is not primarily concerned with using ESG products to have a positive impact in the fight against climate change or social ills.

ESG ratings from agencies for financial products are primarily aimed at risks resulting from stricter regulation or rising CO2 prices, but not at a positive effect of the projects and investments initiated with the money.

In his study, Grote also criticizes “greenwashing”* by fund providers and fund managers.

They are often busy giving funds a green label, although they are usually not and contain normal stocks* and bonds.

Investments in "sustainable" products: finance professor Grote sees advantages

However, the finance professor sees progress in the fact that banks are demanding more and more information from their corporate customers about their CO2 emissions and the associated risks.

"That creates awareness there and can bring about change, because the emissions can also be associated with financing problems."


According to Grote, more transparency is needed about what green financial products actually do, how the money is invested and where the added value lies compared to conventional bonds, for example with regard to climate protection.

He is also pushing for stricter CO2 regulations and higher CO2 prices.


He doesn't want to discourage investors, says Grote.

But if you want to pay attention to ESG, you should take a very close look at individual stocks* and funds.

Green and sustainability seals alone are not sufficient and rather problematic.

Donations may even make more sense than buying some supposedly green financial product, says the economist.

(Rolf Obertreis) *Merkur.de is an offer from IPPEN.MEDIA

Source: merkur

All news articles on 2022-03-29

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