Interest in sustainable investments picking up in Germany

The volume of financial investments classified as sustainable increased by nearly one quarter in Germany last year, according to the latest figures published by the financial industry association Forum Nachhaltige Geldanlagen (FNG). Spurred mostly by large institutional investors, sustainable investments in the country grew 23 percent to 270 billion euros, reaching a share of 5.4 percent of all investments, the FNG's annual report found. While smaller retail investors only accounted for 18 billion euros, the volume held by these private actors nearly doubled in size in 2019 compared to the previous year, a "rapid" increase given that the average growth for retail investors between 2012 and 2018 was only 8 percent. According to the FNG, the growing interest in sustainable investments is to a large extent due to forthcoming legislation at the EU level but also to societal pressure exercised by environmental groups and other activists. However, given that the total sum of investments and funds was over 3.4 trillion euros in 2019, "the market of sustainable funds and mandates, despite strong growth rates, has not made it into the mainstream in Germany yet," the FNG opines. Most investments classified as sustainable by the alliance heeded exclusion criteria, such as banning investments in environmentally damaging projects or in fields prone to corruption, covering 99 percent of all sustainable funds. However, a more rigorous definition of sustainable investments, namely those heeding the so called ESG (environmental, social, governance) criteria, which also form the basis of the EU's green finance taxonomy, covered only 79 percent of all considered investments.

Finance as a key influencer of global climate policy has increasingly shifted into the focus of policy makers in the past years. In order to stay abreast of regulatory changes regarding sustainable finance at the EU level and to seize opportunities arising in a quickly growing green finance market, Germany's government has commissioned an advisory council with drafting a national sustainable finance strategy. A first report, tabled in March 2020, had been criticised by the country's commercial banks, which argued the council would push for a national framework existing in parallel to EU regulation, thereby harming the country's competitiveness as a financial location.