wallstreet: online: Sustainable investments are a mega trend. Nevertheless, there is currently no uniform definition, because terms such as “green”, “sustainable”, “climate-friendly” etc. are not protected by law. What are sustainable investments for you?
Richard Schmidt: The aim of sustainable action should be to influence the lives of other people and future generations not negatively but at best positively. In the wake of climate change in particular, green investing receives further tailwind. With the rise in sea levels, the increasing devastation of large areas and the increase in hurricanes, droughts and floods, everyone realizes that the consequences of climate change are real. Sustainable investment not only relates to the environment, but also to the fields of social affairs and corporate governance. A sustainable remuneration system for board members, for example, must not be designed for short-term profits; a sustainable workplace guarantees ergonomic working conditions, etc. for the employee.
wallstreet: online: Which sustainable investment strategies does the “DWS Concept DJE Responsible Invest” fund use (exclusions, positive criteria, commitment, ESG integration, exercise of voting rights, best-in-class etc.)?
RicHard Schmidt: DJE is a signatory to the United Nations’ Principles for Responsible Investment (UNPRI). The entire range of funds has been geared towards compliance with overarching sustainability criteria such as environmental protection and compliance with human rights and labor standards since 2018 – we have firmly anchored these criteria in the investment process and follow them out of conviction. We are going even further with the DWS Concept DJE Responsible Invest. The mixed fund invests worldwide in shares (at least 25 percent) and bonds of sustainable companies, so-called “green bonds”. These are bonds whose income flows into previously defined green projects. a. Reforestation projects, the establishment of recycling cycles or the improvement of drinking water treatment are among them. In addition, the fund may only invest in companies whose CO2ndEmissions are within very strict limits. This CO2nd-Filter is considered one of the strictest in the field of sustainability funds and is expressed in a very low CO2nd-Fund footprint at fund level. For example, the fund completely excludes industries such as coal energy, weapons and gambling and focuses on the best in their category in the other industries. Clean-tech companies are also included, for example companies that manufacture hydrogen fuel cells or CO2nd– produce reducing additives for aviation kerosene. In the MSCI ESG Quality Score, the fund ranks among the top percent within its peer group and also has the highest sustainability rating at Morningstar.
wallstreet: online: What annual CO2ndEmissions arise when an investor invests 1,000 euros in the “DWS Concept DJE Responsible Invest” and how high are the CO2nd-Saving compared to a comparable conventional fund?
RicHard Schmidt: If an investor invests 1,000 euros in our sustainability fund, he saves about 30 kg of CO2nd-Emissions against an investment in unsustainable indices. He benefits from our years of selection experience and is doing something good for the environment: saving CO2nd corresponds approximately to a 200 km long car journey with a medium-sized car. It is also a goal of the fund to reduce the relatively low CO2nd-Continue to decrease footprint quarter by quarter. This helps us to ensure that many of the companies that we hold in the fund attach importance to becoming more sustainable over time.
wallstreet: online: A 2015 meta-study comes to the conclusion that sustainable investments often achieve even better returns than conventional ones. Can you confirm this from your own experience?
RicHard Schmidt: We also observe that a number of companies with sustainable business models perform very well. Often particularly sustainable companies have a proactive management, which ensures early on that products and corporate culture are exemplary. In contrast, there are companies that insist that they don’t have to change much because of past successes. The result is often weaker products and measurably weaker sustainability at company level. Overall, over the past 2 years it can be seen that sustainable investments have developed particularly well. However, this is partly due to the fact that relatively green sectors such as technology and biotech stocks have performed particularly well.
wallstreet: online: Hydrogen and fuel cell technology play a major role in the “DWS Concept DJE Responsible Invest”. How do you rate the potential of these technologies?
RicHard Schmidt: The fuel cell is a clean way of generating energy and with a view to CO2nd-Belance both the combustion engine and electromobility. Nevertheless, the network of hydrogen filling stations is developing very slowly, at least in Europe and the USA. The reason is the still very high price for the construction of fuel cell engines and the resulting lack of consumer demand. In addition, there are still considerable safety problems in the operation of hydrogen filling stations and, unfortunately, there is also considerable energy consumption in the production of hydrogen. In the coming years, Japan could become a market with a leading function, because here the government already designed its own hydrogen growth strategy in 2017, since it did not want to commit itself to electric mobility alone. By 2030, government funding is said to have equipped 800 thousand cars and 5.3 million homes with the energy source hydrogen. If the pressure is towards CO2nd-Reduction should continue to grow and at the same time the prices for fuel cells drop significantly, the potential market size is huge: a large part of automobiles, homes and ultimately also industrial plants could one day be equipped with them.
wallstreet: online: In a market commentary you describe “sustainability as the new power of the financial markets”. What do you mean by that?
Richard Schmidt: Data in recent years shows that climate change is well advanced and that many developments such as rising sea levels or increasing devastation of large areas can no longer be stopped. This puts sustainability at the top of the political agenda. By specifying requirements for financial players, including asset managers like us, an attempt is made to allocate the cash flows in such a way that poor sustainability is punished – that is, very expensive. As it is vital for companies to get cheap debt and equity, they all feel the pressure to position their products and their company as sustainably as possible. An example of the growing media pressure is the recent “Siemens case”, in which Siemens supplies signaling technology for the operation of a coal-fired power plant in Australia for a relatively small amount and has to accept considerable damage to its reputation. The pressure on large CO2nd– Introducing more gentle (and therefore more expensive) manufacturing methods for issuers such as steel and cement manufacturers will also continue to increase.
wallstreet: online: What measures is DJE Kapital AG taking to reduce the company’s ecological footprint?
Richard Schmidt: The topic has been close to our hearts for a long time. For example, we have set up a project group that deals continuously with pro bono projects to improve sustainability within DJE. So we have the expansion of our company headquarters in Pullach near Munich CO2nd-Planed and carried out neutrally, our CEO comes to work with an electric car, we mostly visit our customers with public transport. We also make our meetings paperless by using laptops and tablets. These small but deliberately introduced steps with lasting effects lead to further mindfulness and also have a positive effect on our investment behavior.
The interview was conducted by Ferdinand Hammer, deputy editor-in-chief at wallstreet: online.