Investors should be encouraged to consider these objectives not only during the analysis and decision making process, but also in the context of risk management. Correspondingly, relevant reporting and disclosure obligations are also provided for insurers, occupational pension schemes, asset managers, etc.
The Bundesverband Alternative Investments e.V. (BAI), the central advocacy association for the alternative investment industry in Germany, generally supports this initiative and has long been vocal about the essential role the implementation of ESG criteria plays in the investment process from a risk management point of view. At the same time, BAI believes caution and restraint should be exercised in the development of an EU-wide taxonomy.
BAI Managing Director Frank Dornseifer cautions restraint in the ESG debate: “We must take care to make sure the whole ESG discussion does not turn into a hype overshadowed by the bureaucratic EU taxonomy. Especially institutional investors are significantly further ahead than one may think in terms of sustainable investing.”
In a BaFin survey of supervised institutions, 73% of surveyed insurers and pension funds recently stated that their investments were sustainable. Well over half have already implemented their own sustainability concepts (negative or positive lists, best-in-class approaches, etc.) and / or followed recognized voluntary ESG industry standards, such as the United Nations-initiated principles for responsible investment.
With this in mind, Dornseifer further emphasized: " Sustainability is characterized by the fact that diversity and forward-looking action are not only recognized, but fostered and encouraged. An EU-wide taxonomy can only have justification if it takes this into account and includes existing voluntary standards instead of excluding them. At any rate, the discussions and attempts at definition in relevant European expert groups should be very interesting. One thing is for sure: sustainable investing is less the result of political definitions and compromises, and more the result of far-sighted, prudent and holistic action on the part of investors. Therefore, it is not about specific requirements that should be set by politics or supervision. Far more, it is about raising the investors awareness in investment decisions and risk management! This is the key to success.”
It is the BAI’s opinion that basic methodological and definitional work has already been completed in many areas of the ESG universe and is available to the industry. Even without a technocratic EU taxonomy, investors can invest on their own initiative. With this in mind, it is therefore essential that before a mandatory EU Taxonomy is introduced and we attempt to reinvent the wheel in the complex European legislative process, existing and – globally! – recognised standards should be put into practice and further developed.
Only recently the PRI (Principles for Responsible Investment) has published an “Impact Investing Market Map”, which is a guide to impact investing and should allow a methodological entry into this sub-segment of ESG investments. The guide contains, for example, a definition for each topic, followed by a list and explanation of the respective criteria that investors can consider when selecting appropriate investments. Additionally, the guide also includes common key performance indicators (KPIs) used in impact investing to assess the environmental and social performance of selected companies.
You can find more information regarding ESG on our BAI-Homepage www.bvai.de and on the new section “main topics”: bvai.de/en/main-topics-of-the-association-work.html
download the press release here
Bundesverband Alternative Investments e.V. (BAI)
- Managing Director -
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Tel.: +49 (0)228-96987-50
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