ESG - sustainability

Lack of ESG standards is also a problem for financial advice

Posted by MoneyController on 13.05.2024

Many investors would have the intention to invest in sustainability. However, the criteria for defining what is sustainable (e.g. ESG) and what is not are not unambiguous and create confusion within this market.

Difficult to draw the boundaries of sustainability

One of the biggest problems concerning sustainable investments concerns the definition of sustainability. In other words, apart from the very serious problem of greenwashing, the point is this: it is difficult to clearly draw the contours of products that are sustainable and products that are not. Jörg Arnold, CEO for Germany of Swiss Life, discussed this with ‘Das Investment’ magazine in an interview conducted by Christian Hilmes. Although dealing with insurance products, the considerations of the CEO of Swiss Life Deutschland are interesting for the sustainable finance sector as a whole.

Two examples of the difficulty in labelling a sustainable product

One of the most relevant problems that emerges from Arnold's words is that the label of a sustainable product can vary based on the ways in which one considers a financial product. Two examples, given by Arnold. 1) Why not consider (as his company does) government bonds committed to climate and energy transition policies as sustainable products? 2) How to consider investments in nuclear energy? As far as nuclear energy is concerned, one only has to think of the divergence of opinions of two countries like Germany and France.

The difficulties for financial advice

These difficulties of analysis and classification complicate the work of a financial advisor, who also has to check the sustainability needs of his clients (the Mifid2 directive specifically provides for a questionnaire to ascertain the sustainability preferences of each client). As Arnold explains, on the one hand, there are difficulties in communicating with clients, as the topic of sustainability is complicated. But on the other hand, even the financial advisors themselves are often unclear as to why one product is sustainable and another is not. Besides the fact that in an area like insurance, Arnold explains, there are not so many products that invest heavily in sustainability.

Read also:

What if ESG was just a passing fad?

Greenwashing, the regulatory clampdown continues and the possibility of a refund emerges

Beware, the risk of greenwashing is growing

TODAY’S MOST READ ARTICLES

MOST READ ARTICLES OF THE WEEK

MOST READ ARTICLES OF THE MONTH

MOST READ ARTICLES IN THE FINANCIAL FORUM

View classification