Dr. Ricken, why is it not just churches and foundations that should take an interest in environmental and social issues when making investment decisions nowadays, but also "normal" treasurers and professional investors?
Dr. Christian Ricken: Because despite all the clichés, they are generally not out to make a quick buck but rather want to generate stable returns with acceptable risks on a long-term basis. With regard to both income and risk, there is plenty to recommend sustainable investment strategies. It is obvious that securities issued by companies that are also well-managed in terms of sustainability will be more stable and develop better in the long term than those of their scandal-prone competitors. Reputation risk is also playing an increasingly important role. In the age of social media, those who invest in nuclear power or arms, for example, face a much higher risk of damage to their image than they did before. For this reason, many professional investors are now pulling their money out of such industries and looking for alternatives. As a customer-focused bank, we offer such alternatives – and have for many years already.
How did this come about?
Dr. Christian Ricken: The impetus came from our customers. The dot-com bubble burst around 15 years ago. Accounting scandals like Enron and Worldcom shook the financial world. Even back then, many investors were realizing that it is not enough just to look at the financial figures alone. They wanted asset managers who examined potential investees in their entirety, also checking whether these companies were managed in a respectable way and complied with environmental and ethical standards.
What conclusions did LBBW draw from this?
Dr. Christian Ricken: We started developing our first sustainable investment solutions together with institutional customers in 2001. In 2002, we then launched our first customized special funds, which we are still managing successfully today. In 2007, we moved into mutual fund business with a climate change fund. LBBW Asset Management now manages customer funds totaling more than EUR 1bn in line with sustainable criteria – and this figure is clearly rising, with an increase of almost 40% in 2016.
Development in sustainable investments at LBBW Asset Management
The performance of sustainable investments has been highly dynamic since the first sustainable special fund was launched in 2002. In 2016 they grew to over EUR 1bn for the first time.
The number of sustainable investments has increased from 0.1 billion EUR (2002) to 22 billion EUR (June 2020).
So you have a lot of experience when it comes to managing assets sustainably. But what role does sustainability play at LBBW itself?
Dr. Christian Ricken: Here, sustainability is a job for the Board of Managing Directors! Sustainability means a lot more to us than simply just complying with environmental and social standards ourselves – which we do, of course, as reflected in the corresponding ratings and seals. But banks play a key role in the economic cycle and therefore have a special responsibility when it comes to structural change, for example in the automotive and energy industries.
What does that mean?
Dr. Christian Ricken: We want to support our corporate customers as they develop new, sustainable business models. We see clear growth prospects here. For this reason, sustainability is one of the four central strategic directions at LBBW. We will therefore also continue to expand our products and services for sustainability-focused investors.
What exactly do you have planned here?
Dr. Christian Ricken: We will step up our advice, for example. Last year, we became the first regional bank to offer our customers comprehensive sustainability research, which investors can use as a reliable source of information about companies' strengths and weaknesses on issues such as human rights and environmental protection. Last but not least, we are not only an asset manager but are also very successful when it comes to helping customers issue securities and issuing bonds and covered bonds ourselves. We intend to use this position to launch a green bond program. In this way, we will make it easier to place "green" issues on the capital market and create new sustainable investment opportunities for investors.