In the first three months of 2021, around two billion dollars a day was invested in so-called «sustainable funds»: Half of all money invested in funds in Europe, he calculates Morningstar. It seems that in the post-pandemic world green finance has never been more popular: today financial institutions completely “indifferent” to ethics are less than a third of the total compared to 39 per cent of investment companies which in 2019 declared that they do not implement ESG policies specific in financial and banking activities, Natixis estimate.Yet all is not well. The biggest risk is that the numbers hide a facade environmentalism, the so-called greenwashing. Because talking about sustainable finance does not mean practicing it: “If we are all sustainable, no one is sustainable,” he argues Mauro Meggiolaro, the researcher who edited the (fourth) Report on “Ethical and sustainable finance in Europe»Published by the Ethical Finance Foundation.
The study, divided into three parts, compares the world of ethical banks with the 4,500 banks in the euro area and for the first time with the aggregate of cooperative banks. The data shows that ethical banks, proportionally, grant more loans and offer more current accounts and deposits, are closer to small savers and households and less involved in activities on the financial markets. Plus they have higher profitability, less volatile results over time and withstand crises better. Here is a summary of the results: In the last ten years, from 2009 to 2019, ethical and sustainable banks have made twice as much as the European banking system, with an average annual return (in terms of Roe) of 5.31 against 2, 37 percent.
Assets, deposits, loans and equity so increased by around 10 per cent per year. From 2009 to 2019, for example, assets (and therefore total investments, credits and liquidity) grew on average by 9.91 per cent per year against +0.41 for European banks. The same is true for customer loans: +10.16 per cent per year on average against +0.63 per cent for European banks. In 2019 the granting of credits representedon average, 73.2 per cent of total assets for ethical and sustainable banks, but only 40.8 per cent for the European banking system. The total assets of European ethical and sustainable banks also continue to grow. In 2019 they rose to 55.5 billion euros, 8.3 percent more than in 2018.
Ethical and sustainable banks are close relatives of cooperative banks, including when it comes to the capital structure. Banca Etica, so far the only Italian bank in the sector, generally outperforms other ethical and sustainable European banks, particularly when it comes to deposits, earnings and credits. Finally, the Report shows that European ethical banks adopted innovative strategies during the pandemic help customers overcome the emergency, leveraging solidarity and its reference networks.
«The loss of confidence in the traditional banking system move customers to green banks», Argues Meggiolaro to explain the strong growth of ethical banks, which are more protected in times of crisis because they are less exposed to the financial markets. Even if then, in times of zero interest, it is useful to have a more balanced structure that can also count on the commissions of an asset management company, as does Banca Etica. Ethical banks operate «in a still young market, with great potential thanks to the growing interest of savers in environmental and social issues “. In fact, even conventional banks have noticed this and are now rushing to offer “green” products to retain or win over consumers.
The surprise is found in the second part of the Report, which contains an in-depth analysis of the SFDR, the EU regulation on the transparency of sustainable finance: the only one in force so far (from March 2021) within the European Commission’s Action Plan. With the Action Plan we find that one in four European investment funds (24%) would be classified as “sustainable” (in whole or in part). And that the total assets of so-called sustainable funds in Europe jump from the 1,332 billion estimated by Morningstar a about 2,500 billion under the new rules of the SFDR. The hypothesis, according to Meggiolaro, is that the new regulation has lowered the bar in the definition of sustainability.
When the Report analyzes the funds of the top three Italian asset management companies (Generali, Eurizon of the Intesa Sanpaolo group and Amundi, which integrated Unicredit’s Pioneer), we see that as of December 31, 2020, oil companies, companies that produce energy by burning coal and that produce weapons appear among the funds proposed as respecting the ESG criteria. Even an investigation byEconomist, in May, revealed that each of the 20 largest investment funds sold as ESG holds an average of 17 fossil fuel producers, starting with Exxon Mobil and Saudi Aramco.
In the third part, the Report then presents a new index, created with researchers from the University of Pisa, to classify banks based on human rights violations. The “worst” institutions globally according to a study referring to the years 2000-2015? Standard Chartered Bank, Bnp Paribas, Société Générale, Berkshire Hathaway and Svenska Handelsbanken.
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