The seal of the Forum for Sustainable Investments gives you a quick overview of which funds you can use to invest in environmental protection or human rights. It evaluates funds and makes sustainability transparent for everyone.
With food or clothing you can choose from numerous organic and Fair Trade seals orientate. But what about investments? Those who invest privately in a fund usually have no information about what happens to the money. The fund holds securities from various companies. But how do they make their profits, do they pay attention to environmental protection and do workers get a fair wage?
Better comparability: The seal "Forum for Sustainable Investments"
Seal logo of the forum for sustainable investment
(Photo: CC0 / FNG-Siegel.org)
Before buying fund investments, you can register at inform. The FNG Forum has been testing and certifying sustainable funds since 2015. Together with financial experts and experts from social and environmental organizations, the forum develops detailed criteria to assess the sustainability of funds and make them comparable. According to the rating, funds receive stars, with three stars being the best rating.
The FNG forum wants the following with the seal aims to reach:
- a quality standard for investments in funds.
- The customer one clear Provide guidance for investments.
- The quality of sustainable investments to back up.
- The competition promote between providers.
- Sustainable investment approaches establish in the financial market.
The “Research Group on Sustainable Finance” of the University of Hamburg takes care of the annual reviews and assessments of the funds.
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The FNG seal promotes sustainability in companies
Sustainable investment supports the economy
(Photo: CC0 / pixabay / SarahRichterArt)
who shares or others securities buying in a fund wants to invest their money safely and profitably. For companies, funds are a way to get a lot of money from the stock market. Companies use the money from the sale of shares to finance their businesses. With the money that you have invested in an equity fund, you finance the companies in the fund portfolio.
From your decision to put money in one sustainable funds investing only benefits companies that also work sustainably. This puts sustainable business more in the focus of companies because it unites them Competitive advantage received on the money market.
- The more we consciously ask about sustainable funds, the more companies have one advantage of following sustainability standards.
- If more companies act sustainably, funds can better compensate for price fluctuations on the stock market and your return increases.
The FNG seal gives you guidance on how sustainable a fund is!
- The FNG seal can however Not forecast the expected profit or indicate how the price will develop.
- It cannot assess whether that Risk of this investment fits your personal expectations.
You should definitely answer these questions with yours bank manager discuss, preferably at one sustainable bank. A personal consultation is mandatory before any fund investment.
FNG seal checks the selection criteria of the funds and their commitment
A fund portfolio is usually composed of shares or other securities from entrepreneurs. In the case of a sustainable fund, the selection criteria in addition to the return are also criteria for sustainable corporate management. Each fund company first defines these criteria itself.
The FNG Forum evaluates sustainable funds in two steps:
- The FNG forum checks whether this selection criteria the fund meets the minimum requirements for sustainable corporate governance. The sustainability criteria for companies in sustainable funds cover the areas of environmental protection and social and responsible corporate management, in short IT G–criteria. ESG stands for the English term for environment, social and ethical corporate management – Environmental, Social and Governance.
- In the FNG certification, the seal checks how much the fund companies are committed to sustainability and feel committed to the standards. The English term for this also stands in GermanSustainable and Responsible Investment" or short SRI. The FNG assessment includes whether the fund manager applies stricter exclusion criteria or whether he is in a dialog with companies himself and thus promotes sustainability.
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Step 1 – the FNG seal checks the sustainability criteria
The FNG seal creates transparency in sustainable investments
(Photo: CC0 / pixabay / TheDigitalWay)
When it comes to fund certification, the FNG checks how thoroughly the fund manager proceeded with the assessment.
1) This Sustainability standards companies must meet:
- no participation in prohibited weapons production, including ABC weapons (atomic, biological, chemical), cluster bombs and mines.
- no participation in nuclear energy, crude oil extraction from fracking or oil sands (coal will also be viewed critically from 2019)
- Companies must follow the guidelines of the. As early as 1999, the UN established 10 principles for corporations in order to make globalization more social and ecological. They regulate the areas of human rights, labor law, environmental protection, corruption and bribery.
2) Sustainable funds can also in Government securities invest, the so-called government bonds. Sustainability criteria also apply to states:
- democratic state order
- human rights
- Signing of the UN Biodiversity Convention – an international environmental agreement to protect biodiversity
3) The FNG forum also reviews the. Sustainable funds are thus committed to their investors open, honest and understandable to inform about the fund.
Every fund certified with the FNG seal has one. You can access these fund profiles on the FNG website and take them to a consultation with your bank advisor. They give you an overview of the companies in the fund portfolio and to what extent the ESG criteria are met.
Step 2 – the FNG seal examines how funds promote sustainability
The FNG forum reviews the fund’s commitment.
(Photo: CC0 / pixabay / tweetyspics)
How does the fund manager choose the stocks?
- Is the selection of shares, topics or industries related. So-called thematic funds, for example, only invest in renewable energies or electric mobility.
- Best-in-class selection, whereby the fund includes the best companies in each industry. The sustainability analysis draws up a top ten list for each industry and the fund uses this to select the best stocks.
- Are there additional, stricter criteria besides the ESG exclusions? (For example: fossil energy is excluded altogether or the arms industry in general.)
Who carries out the analysis?
- The fund company’s own team of experts
- external rating agencies that specialize in ESG analysis
How far does the sustainability analysis go?
- Only the company that issues the shares is valued?
- Does the ESG analysis involve the whole group? (For example: Audi and VW or Google and Alphabet Group)
- Is the supply chain of subcontractors and suppliers also analyzed? For example, in textile companies, checking the supply chain can lead to critical results.
To what extent does the fund manager influence companies?
Anyone who owns shares also has the right to vote at the shareholders’ meetings. With the purchase of fund shares, the voting rights of the shares are transferred to the fund manager. This means that the fund manager acts as an institutional investor and can thus give his vote a lot more weight. Participation in shareholder negotiations can vary.
Criticism of the FNG seal
In the “Green Equity Fund” test, Öko-Test criticized many funds in issue 11/2018. It was particularly striking that half of the equity funds examined still had FNG profiles from 2015/16 – meaning they were long out of date.
It is also sometimes criticized that the FNG is ultimately a platform that belongs to banks and investment companies. This should at least be mentioned critically here – and you should keep it in mind.
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