Lack of clarity poses hurdles to sustainable investment – opinion

Sustainable investment is much more than a fashionable trend, and while the hype surrounding it will lead to disappointment, it’s nevertheless the right path, Michael Maisch writes in an opinion piece in Handelsblatt. “Banks, investment companies and asset managers have been falling over themselves in their commitment to a better, greener and more socially responsible world of finance, at least since the European Union launched its Action Plan for Sustainable Investments,” Maisch points out, noting that the EU would like to see at least 180 billion euros worth of sustainable investments annually. However, two factors are responsible for the misplaced hype in green investment: “The huge ambition reflected in the European Commission's plan, and the lack of precise definitions of what exactly sustainable investments are.” There are currently some 400 billion euros invested in sustainable financial products, Maisch adds. An additional 180 billion euros annually would divert enormous capital flows. “The danger that it will lead to misallocation is obvious,” he warns, stressing that the categories for sustainability remain nebulous. Nuclear power, for example, is seen by France as sustainable, CO2-free energy, not so by Germany, which considers it dangerous due to the risk of accidents and the difficulties in waste disposal. Sustainable investing is nevertheless “the rational answer, not only to ecological but also to economic issues. The trend will therefore not disappear, but prevail in the end.”