Double dividend

Investors who need a kick should gamble. Most investors, however, are more interested in a long-term perspective: saving for retirement or ensuring lasting success for their company. They have little interest in momentary exuberance when they are focused on the future. That is why many customers of LBBW and BW Bank look for investments that are profitable over the long term – which brings them to sustainable investing. "Sustainable" means these companies place as much importance on environmental and social issues as they do on economic ones, thereby ensuring long-term success.

Word gets around, and that creates heightened interest. In 2017 across Germany, EUR 171bn was invested in socially responsible investment products, according to calculations by the Forum Nachhaltige Geldanlagen (FNG, Forum for Sustainable Investments). FNG says the total amount put into sustainable investments is significantly higher when they expand their scope from products to investment strategies. Then the total assets aimed at "responsible investments" in Germany amounts to an impressive EUR 1,400bn. The total number of sustainable investments being watched over by LBBW Asset Management Investmentgesellschaft mbH, or LBBW AM for short, is growing continuously. The wholly owned subsidiary of LBBW manages EUR 71.9bn in assets, with roughly EUR 20bn of that in accordance with sustainable criteria. That share is set to increase because several major customers are ready to make a final decision on converting their investments to a sustainable policy.

Socially responsible investors are changing the rules

Afterwards, investors will be able to enjoy a "double dividend": On top of the financial return, they have a clear conscience. In actuality, the payoff is three-fold. By increasingly funneling their capital toward companies that do business responsibly, investors are changing the rules. "We expect that, in ten years' time, there will be hardly be any public institutions in Germany that do not invest their money sustainably," says Christoph Gross, a fund manager at LBBW AM. That will cause companies to make corresponding changes to their strategies.

This is where LBBW can help. "We want to support our corporate customers as they develop new, sustainable business models," says Dr Christian Ricken, member of the LBBW Board of Managing Directors. According to him, investors have realized that "it is too short-sighted merely to look at the financial data." Ricken points out the reputational risk by adding that a company investing in nuclear power or arms has to expect its image to suffer even greater damage than in the past, thanks to social media. "For that reason, many professional investors are now pulling their money out of such industries and looking for alternatives," says Ricken. "As a customer-focused bank, we offer those alternatives — and have done so for many years now."

Rendite-Plus for sustainable investments

LBBW and BW Bank use a double filter for selecting appropriate investment options: first, the findings of independent sustainability agencies, and, second, the internal results of LBBW Research. Only products that pass though both filters are added to the portfolio of sustainable investments.

That offers the prospects of returns that are not only reliable but better. For example, take Diakonie Stetten, for which LBBW AM manages the company pension plan for its roughly 3,000 employees.

A meta-analysis by the Research Center for Financial Services at Steinbeis University in Berlin, based on a total of 195 individual studies on the topic, concludes that sustainable investments tend to have an advantage over conventional investments. Based on experience, Steffen Merker, Head of Sustainable Investments at LBBW AM, says, "Strictly sustainable portfolios are more resistant to negative shocks."

On the path to sustainable business models

That experience had time to mature. As early as 2002, LBBW AM created its first special fund focused on sustainable investment criteria. Private investors can also make targeted investments in funds. "It started with the LBBW Global Warming in 2007," states Christoph Keidel, the manager in charge of the fund. "We have always invested exclusively in companies with products that are intended to counteract further global warming." In 2008 came the LBBW Nachhaltigkeit Aktien 2010, the LBBW Nachhaltigkeit Renten. All three sustainability funds recently received the prestigious seal of approval from the Forum for Sustainable Investments (FNG). The LBBW Sustainable Equity and LBBW Sustainable Bond funds were awarded two stars, repeating the acknowledgment received last year. The LBBW Global Warming fund also received two stars for the first time this year.

In its latest Sustainability Report, Rainer Neske, Chairman of the LBBW Board of Managing Directors, says, "Our desire is to make sustainability a permanent part of our thinking and actions." Sustainability has therefore been a key pillar of LBBW's strategic agenda since 2017. To that end, Neske has set a goal of going beyond offering sustainable investment opportunities and "being a dependable and innovative partner who helps our customers advance toward sustainable business models."