The topic of securing a liveable future has now fully arrived in the financial sector. Investors’ growing desire to invest their capital not only profitably but also responsibly has led to a boom in the selection of sustainable forms of investment in recent years (What does sustainable investment mean?). Just how trendy sustainable investments have become is documented by the 2022 Market Report by Forum Nachhaltige Geldanlagen (FNG). Following further significant growth of 61 percent in sustainable investments, just under one in three euros was invested sustainably in Austria as of the reporting date of December 31, 2021. The total volume of 63 billion EUR also marks an all-time high for assets managed in accordance with environmental, social and corporate governance criteria. Private investors in particular again invested significantly more capital in sustainable investment products: their sustainable investments rose by 164 percent to 31.70 billion EUR. If the investments for which sustainability criteria are anchored at the corporate level are also taken into account, the total amount for responsible investments in Austria as of December 31, 2021 is 134.14 billion EUR.

From niche to mainstream

But is everything that claims to be sustainable really sustainable? How can you as an investor be sure that your money is actually employed responsibly? Fund companies answer this question by ensuring the transparency of the selection and investment processes and obtaining certification with established national and international quality seals. The latter serve as an indicator that sustainable investments actually are climate-friendly and meet high social standards. In Austria, a total of 87 of the 133 sustainable funds covered by FNG had a quality seal in 2020 – which corresponds to roughly 65 per cent. Which quality seals are available here? Here is an overview of the most important ones:

Focus on clarity: sustainable quality seals and transparency

• One of the world’s first labels for sustainable funds was the Austrian Ecolabel for Sustainable Financial Products, which was established in 2004 and still exists today. It is sponsored by the Federal Ministry of Climate Action, Environment, Energy, Mobility, Innovation and Technology and managed by the consumer protection association Verein für Konsumenteninformation (VKI). The assessment is performed by accredited experts, who issue the assessment certificate on behalf of the given applicant – usually a fund company.  The criteria for the Ecolabel define various dos and don’ts across all product groups. On one hand, exclusion criteria govern which investments are prohibited (e.g. in the areas of fossil fuels, nuclear power, genetic engineering, and the defence industry). On the other hand, selection processes must be in place for identifying companies, countries, or projects that truly make positive environmental and social contributions. In addition, investors must be given a clear picture of the social and ecological concept of the sustainable financial product they have chosen. The rapid development of the ESG market (ESG: Three letters, one sustainability approach) is also demonstrated by the Austrian Ecolabel: While it took fourteen years from the time the seal was launched in 2004 until it was awarded to the 100th fund, it only took three years for this figure to double. The 200th product received the Ecolabel in August 2021.

• Another sustainability certification that has been very popular in Austria for many years is the FNG Seal. It represents the quality standard for sustainable investment funds in the German-speaking market and was introduced in 2015 following a three-year development process that was completed in cooperation with key stakeholders. The holistic methodology of the FNG Seal is based on a minimum standard. This includes transparency criteria and compliance with labour and human rights, environmental protection, and anti-corruption standards as set forth in the internationally recognised UN Global Compact. Investments in nuclear power, coal mining, significant power generation from coal, fracking, tar sands, and weapons and the defence industry are excluded. High-quality SRI funds that truly shine in the areas of institutional credibility, product standards, and portfolio focus (selection, engagement, and KPIs) can receive up to three stars.

• The European SRI Transparency Logo for sustainable funds, which was established by the European Sustainable Investment Forum (EUROSIF) in 2008, focuses on providing transparent information. The underlying Transparency Code is based on the principle that the signatories should be open and honest, and disclose accurate, adequate, and timely information to give investors, the public, and other stakeholders detailed insight into the sustainability strategy of a given fund. The Transparency Code was updated in 2018 in order to reflect the most important practices in the area of sustainable and responsible investments and green finance. The fact that EUROSIF is committed to keeping pace with the dynamic transformation of the concept of sustainability is demonstrated by a recent survey. All financial institutions that apply the Transparency Code were invited to participate in an online survey from 26 January to 2 March 2022. The goal is to better understand how financial market participants use the Transparency Code, how the Code interacts with other more recent disclosure requirements at the EU level, and how it should be refined in future.

• Another certification is the yourSRI Transparent label, which has been awarded by yourSRI since 2017. yourSRI.com is an international online platform that provides access to information about ESG ratings and carbon footprints, among other things. The fund ratings of yourSRI are intended to create more transparency at the fund level and to help investors better understand how the companies held by an investment fund manage their environmental, social, and governance risks. According to its own information, the platform analyses over EUR 15,000 billion in fund assets daily, which corresponds to 97 per cent of the assets managed by funds and ETFs that are listed on the major European markets.