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Ethics Committee
Sustainable investment
The dignity and universal basic rights of every person are at the heart of ethics. Ethics deals with the criteria of a good life and responsible behavior, fair interpersonal interaction and just coexistence in a free and democratic society.
Investment processes are traditionally based on the basic requirements of security, return and liquidity. Investment ethics combines these “old” criteria with new standards. At the heart of these standards is the socially and environmentally responsible business activity of the company, which is derived from the principles of good corporate governance. Companies are also quasi-public institutions. As such, they are at the service of a functioning society.
Sustainability was first defined in 1987. Sustainability is development that meets the needs of the present without compromising the ability of future generations to meet their own needs and choose their own lifestyles (as defined by the Brundtland Commission). Arete Ethik Invest takes ecological, social and economic factors into account under the concept of sustainability. All investments undergo a multi-stage selection process in which issuers (companies and countries) are analyzed according to defined criteria.
The funds paid in are used to grant loans to particularly environmentally friendly projects.
Example: Umweltbank’s environmental savings account.
These are bonds with proceeds earmarked for a specific purpose, either for environmental or social projects. Various organizations are striving to standardize this form of investment, e.g. within the framework of the Green Bond Principles (GBP) reference work or by means of a certification option offered by the Climate Bonds Initiative (CBI).
By buying stocks rated as sustainable, you can invest directly in sustainable companies. The selection of stocks is relatively complex. Specific rating agencies offer sustainability analyses (Inrate, Oekom, Sustainalytics, imug, Asset4, etc.).
Depending on the fund’s focus, the fund invests in various sectors and pursues either more theme-oriented strategies or a bottom-up approach (based on stock selection). The selected sustainability criteria differ greatly in some cases.
Investors who acquire shares in a wind/solar power park generally become limited partners in the fund company. As closed variants with a fixed capital commitment and usually longer terms (> 10 years).
Agenda 21, which was adopted by the UN in Rio, provides detailed instructions for action to counteract further deterioration in the situation of people and the environment and to ensure the sustainable use of natural resources. Agenda 21 consists of a total of 40 chapters in which all relevant policy areas and action measures are addressed.[www.nachhaltigkeit.info]
The term Corporate Social Responsibility (CSR) describes the voluntary contribution of business to sustainable development that goes beyond the legal requirements (compliance).
Corporate responsibility is sometimes also described as corporate citizenship. This is primarily about ascribing a responsibility to the company that is similar to that of a “citizen”. Accordingly, a company should also perform civic duties and strive for the public good.
Corporate volunteering, usually translated in the literature as “company volunteering programs” or “promotion of employee engagement”, generally refers to the use of a company’s human resources for charitable purposes that go beyond its original core business.
Environmental, Social, Governance. The three aspects “environmental”, “social” and “governance” together represent the “sustainability” momentum. Investors are increasingly using ESG criteria when selecting stocks.
Ethics deals with the criteria of a good life and responsible action, fair interpersonal dealings and just coexistence in a free and democratic society. Accordingly, not only personal but also institutional and political action is important.
A “global pact” initiated by Kofi Annan at the World Economic Summit in Davos in 1999 and directed at business enterprises in order to anchor the principles in the areas of human rights, labor standards, environmental protection and anti-corruption as a minimum standard (10 main principles) in their member companies and to promote them worldwide.[www.nachhaltigkeit.info]
In the 18th century, mining principles were established in Germany to ensure that sufficient quantities of wood were available for the construction of silver mines. The aim was to ensure that no more trees were felled than could grow back.
The guiding principle of “living from interest and not from capital” developed from this approach, which was initially shaped by forestry. The concept of sustainability emerged in connection with the “Brundtland Report”, which for the first time spoke of a “permanent state of equilibrium” that should “meet the needs of the present generation without compromising the ability of future generations to meet their own needs”. Later, the famous three-pillar model, also known as the triple bottom line (TPL), was introduced: According to this, development is sustainable if the ecological, economic and social dimensions are considered simultaneously and equally.[www.nachhaltigkeit.info]
This EU Regulation (2019/2088) of the European Parliament and of the Council of November 2019 on sustainability-related disclosure requirements in the financial services sector regulates the disclosure requirements of financial services with regard to the consideration of sustainability issues.
In German, this means “negative impact on sustainability factors”. As of 10.03.2021, financial market participants have been obliged to make the consideration of PAIs transparent in their investment decisions.
Socially responsible investments – ethical or socially responsible investments
According to Freeman (1983), the Stanford Research Institute (SRI) used the term “stakeholder” for the first time in 1963 to make it clear that shareholders (stockholders) are not the only target group that must be taken into account by management. Freeman defines “stakeholder” as a group or individuals who can influence or are affected by the achievement of an organization’s objectives. Frequently used stakeholder groups: Employees, customers, suppliers, the public, investors.[www.nachhaltigkeit.info]
THE EU taxonomy is one of ten action points in the EU action plan for financing sustainable growth. The taxonomy creates a sustainability classification system that uses harmonized criteria to determine whether an economic activity is climate-friendly. It was suggested that social aspects should also be increasingly taken into account in future developments.