"Bringing sustainability and returns in line"

Sustainable and ESG-compliant financial products are very popular. Stefan Walde, CEFA - Head of Asset Management at Hypo Tirol Bank, on the new understanding of values among investors.

Mr. Walde, how has the demand for sustainable financial products among your customers developed in recent years?

Stefan Walde: In the last few years there has been a significant increase in customer demand for sustainable investments. Younger investors in particular are showing a growing interest in organizing their own wealth accumulation from a sustainable perspective. The now wide range of products in this area also helps to better serve differentiated customer requests.

How do you rate the importance of these products, especially among the younger ones?

Stefan Walde: The trend towards a more sustainable and environmentally friendly lifestyle is currently playing a decisive role for many young people. This turning point is also reflected in an increased demand for sustainable financial products. In short, many young people want to make a contribution to their future - and that of their children. Even if the budget for their own photovoltaic system or their own electric vehicle is not yet sufficient, young savers can, for example, participate in a “greener” future today through a fund savings plan with sustainable investments.

Sustainability and returns have long been regarded as mutually exclusive terms. Is that history?

Stefan Walde: The extent to which sustainability and returns are mutually exclusive - or even support one another - also depends on the respective industry. A wind power producer will have fewer problems balancing both aspects than an oil refinery, for example. Furthermore, both eyes were often turned a blind eye in the past when it came to the negative effects of the “high return”. For example, the “return on investment” in the automotive industry would probably not be so high if companies had to pay for the health consequences of their products. As long as these are borne by the state health system, of course, there remains a “mathematical” higher return for the traditional car manufacturers of this world. In order to be able to counter climate change effectively, we as a society will have no choice but to reconcile both terms.

The transformation of the economy into a “green economy” requires massive investments. The EU will issue green bonds to finance it. How can you participate as a (small) investor?

Stefan Walde: Investors can participate in the issuance of green bonds by investing in either actively managed funds or passively managed ETFs based on green bond indices. These products are available to both large institutional investors and small investors.

Green bonds:

The core of a green bond is the use of the proceeds from the issue for green projects, which should be appropriately recorded in the bond documentation. The selected green projects should create a clear environmental benefit that is evaluated and, if possible, quantified.

The Green Bond segment at the Frankfurt Stock Exchange bundles bonds that meet the Green Bond Principles (GPB) of the International Capital Markets Association.

The four core components of the GBP are:

1. Use of Proceeds
2. Process for Project Evaluation & Selection
3. Management of Proceeds
4. Continuous reporting

The categories of suitable green projects include, among others:

• Renewable energy (including production; transmission; applications and products)
• Energy efficiency (e.g. in new and renovated buildings; in energy storage; district heating systems; intelligent networks; applications and products)
• Pollution prevention and control (including reducing air pollution; greenhouse gas control; soil treatment; waste prevention and reduction as well as energy- and emission-efficient waste incineration plants)
• Environmentally sustainable management of living natural resources and land use (including ecologically sustainable agriculture and forestry including first afforestation and reforestation as well as conservation and restoration of land areas; ecologically sustainable and species-appropriate animal husbandry, fishing and aquaculture; intelligent agricultural instruments such as biological plant protection or water-saving drip irrigation)
• Preservation of terrestrial and marine biodiversity ( e.g. protection of coasts, marine areas and catchment areas)
• Clean transportation (including electric and hybrid transport; local, long-distance and rail transport; non-motorized and multimodal transport; infrastructure for clean energy vehicles and reduction of pollutant emissions)
• Sustainable (waste) water management (including sustainable infrastructure for clean water and / or drinking water, wastewater treatment, sustainable urban drainage and river regulation as well as other flood protection measures)
• Adaptation to the already existing climate change (including supporting information systems such as climate monitoring and early warning systems)
• Environmentally efficient and / or suitable products, product technologies and processes for the circular economy (including development and introduction of ecologically sustainable products with environmental seals and certificates, resource-saving packaging and sales)
• Environmentally friendly buildings that meet regionally, nationally or internationally recognized standards and certification criteria

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