Sustainable funds climbing in Germany as chemicals heavyweight commits to ESG criteria

The volume of assets managed in retail funds under sustainability criteria in Germany has doubled over the past five years from 15 to over 30 billion euros since 2014, Frank Bock, a spokesperson of the German Fund Association BVI, told Clean Energy Wire. The share of funds managed under sustainability criteria, which gauge the impact of financial activities on environmental, social, and governance (ESG) aspects, stood at about three percent of the total volume of retail funds as of late 2019, gaining up to 4 billion euros in volume per year, Bock said. "We expect a decisive boost in 2021 due to forthcoming EU regulation," he added. He said sustainable asset management was nothing new per se but that competition in the field recently had started to gain traction. "That's a very welcome development," Bock said.
An announcement by chemicals producer Lanxess illustrates the trend on German capital markets to put greater emphasis on the ESG criteria. Lanxess on Wednesday said it has linked its main credit facility worth one billion euros in cooperation with 12 different banks to fulfilment of the ESG criteria. The company says the move is aimed at simultaneously reducing its greenhouse gas emissions and increasing the share of women in management. “We are convinced that sustainable criteria are also becoming increasingly important for the capital markets," Lanxess said in a press release.

The inclusion of ESG criteria and alignment of financial policy with climate targets has become a key issue for financial market actors and the German government alike. Upcoming EU legislation on 'green' lending and investment, the so-called taxonomy, as well as new rules on customer counselling by bank employees meant to emphasise sustainability in finance are supposed to take effect over the next years in a bid to unlock the financial sector's vast potential for promoting emissions reduction.