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Money can be seen as a ballot, because money is not neutral. Regardless of whether it is used for pensions or for free investments, we have the choice of whom we entrust our money to. We can invest it in armament companies and oil companies, or we can consciously focus on sustainable investments.
In this series, we will look at how to invest sustainably and make provisions for the future in Switzerland. Today we want to talk about sustainable investment in general and have invited experts for an interview:
Note from Schwiizerfranke: Unfortunately, Freya Savings received too little demand and ended its offer at the end of 2021. Nevertheless, this interview remains relevant and exciting, which is why we leave it online. Sustainable retirement planning and investments are possible in Switzerland with Inyova, for example.
Co-Founder Freya Savings
Advisor investment solutions
Cantonal Bank of Graubรผnden
More and more financial service providers offer the option to invest sustainably with them. But what does this actually mean?
Roman:ย Great question. For us at Freya Savings, the answer is quite simple: Sustainable investments are not harmful in the first place for people and the environment. This is not the case in business areas such as coal, but also nuclear energy, weapons, alcohol, tobacco or gambling. We consider these "Exclusions" of products and activities that really shouldn't be in a decent portfolio as really central and non-negotiable.
Many ESG approaches still use a "best-in-class"This approach evaluates the companies in each industry sector according to their ESG score and includes a certain percentage of the better companies in the portfolio. However, this approach does not necessarily have clear exclusion criteria, so that companies with critical products may very well be included in the portfolio.
Rolf: As building blocks for sustainable investments, various sustainability strategies (norm screening, exclusions, best-in-class, sustainable themes) must be combined.ย
Secondly, sustainable investments must make a direct contribution to a sustainable futureThe "useful" elements mentioned at the beginning of this article, for example, bring a better future. In the case of renewable energies, environmental technologies in general, electric mobility and clean public infrastructure, these effects are clearly visible. All these topics are, as I said, a central component of the investment strategy, which every Freya customer can individually target via the Sinn profile.
Thirdly we would say that a consideration on the carbon intensity of the companies or the transformation to a low carbon economy is certainly very helpful. Sectors such as the oil and gas industry, but also carbon-intensive industries such as concrete, the construction industry or even car manufacturers need to switch to new, clean technologies as much as possible. Those that don't and can't show clear results should be kicked out of the sustainable indices and will be divested (i.e. investors sell these stocks).
So if you want to invest sustainably, this has a strong influence on the investment opportunities available. Does this mean you have to expect a minimised return?
Rolf: No, absolutely not. Studies clearly show that there is no yield disadvantage with sustainable investments.
Roman: We also want to show this with Freya: We want our customers to see that a sustainable investment approach generates a better financial return in the medium and long term than a traditional investment solution, and also provides an environmental and social return. Furthermore, we believe that it is important to stand up for sustainability in the financial market through signalling and commitment. Communication is so important! We want to create a sustainable movement where investors can relate to sustainable values.
One of Freya's focuses is growth companies. Do you think growth should be defined differently in terms of sustainability?
Roman: Growth companies are a double-edged way of sustainable investing. On the one hand, "growth" in general is not necessarily compatible with a sustainable economy. If more and more people consume more and more resources, this will simply bring us to the planetary limits.
David: On the other hand, growth companies also have clear advantages over the "old economy". On the one hand, these companies are usually much more digital and earn their money not with hardware, but with software and services. This is reflected in the much lower CO2 footprint of these companies. Secondly, growth companies in sectors such as environmental technologies or biotech are really central, as they can really make the world a better place with their technologies.
If we invest in such sectors, it is because new technologies can change the world in a positive way. - This can be seen, for example, at Corona with the way global vaccines were developed so quickly or how quickly companies were able to let their employees work from home using teleworking.
Does the sustainability trend create an "anti-ESG opportunity"? After all, arms companies, for example, fall out of sustainableย indices, which automatically results in less money flowing to them and thus in a drop in their share price.
David: Well, that is a good question! This case does arise and certain "speculators" will certainly try to profit from these opportunities. However, it should be noted that for dirty industries there are also increased risks. Finally, the sustainability trend can also be enforced more and more by the regulatory side. Further increases in taxes (e.g. tobacco tax) make these investments more risky or less attractive.
Some providers are downsizing their allocation due to a lack of investment opportunities. Is that Risk for investors withย sustainableย Focus bigger?
Roman: We do not see the problem. A deliberate restriction to companies with a sustainable Corporate strategy in no way reduces our scope for investment.
On the contrary, this strategy, if supported by many investors, motivates companies that still have some catching up to do in terms of sustainability to quickly catch up with the best, provided they do not want to be punished by investors or the stock market. This will then be reflected in a general improvement in a sustainable economy. That's why we believe it's so important that we all fully jump on the sustainability bandwagon and not pretend it's not perfect yet. Doing nothing is much the greater danger than jumping in now.
A great closing, thank you all so much for this first part in our guide to sustainable investing!
With our money we can achieve a return in a sustainable way. To discuss sustainable investing throughout Switzerland, risk and return are not obstructive issues. After all, a growing investment portfolio of sustainable investments offers more and more choice. At the same time, sustainable companies are often particularly innovative and thus do well economically. In our view, there are no counter-arguments worth mentioning. But there are some pro-arguments for ESG investing or sustainable investing! In our Mission 2021 we have taken up the topic of sustainable investment as a focus topic and are already looking forward to further articles with the experts from Freya.
What's your take on all this? Do you invest sustainably?ย
Leave us a comment there!
If you want to learn more about Freya Savings, or invest your 3rd pillar with them in a sustainable way, you can get to Freya 3a here:
Transparency Note: This post was created in collaboration with Freya Savings. The content presentation and description has nevertheless been created independently and freely by Schwiizerfranke.ย
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2 Responses
We think it is important to inform our customers about sustainable investment. Thank you for this really exciting and understandable blog post for everyone! Great interview with the 3 experts.
To be honest, I never gave much thought to the fact that my 3a funds represent the financing of institutions, so to speak. So that they work with it and I can just with the ESG aspect and securities consciously direct who gets "funding assistance" and who does not. Might sound strange, but it was a little eye opener for me ๐