When it comes to sustainability, investors are feeling increasing pressure from the political side, particularly in the USA. The phenomenon is still rarer in Europe, but there is also a growing sense of fatigue when it comes to ESG and the associated regulations. Yet sustainable finance has experienced an enormous upswing for years, has moved out from the green corner and is now undisputedly mainstream.

The players who were the first to tackle the topic are still around. However, focussed ESG asset managers and green fund boutiques have not really emerged from their niche. The vast majority of green fund business is organised by the large investment companies. „The topic of ESG is less en vogue than it once was. Many ESG providers are struggling with headwinds and are currently having problems with performance,“ says André Härtel, Head of Fund Selection at the analysis and rating firm Scope. Recent lower returns are partly due to the fact that defence stocks, for example, are included in the broad indices.

Scope has identified around a dozen providers in Germany that specialise exclusively in ESG.
These are medium-sized companies that manage assets in the single-digit billion range, and a number of smaller niche players. Ökoworld is one of the long-established green houses. The company managed fund assets of 3 billion euros at the end of 2023 and was founded in 1975. It was called Versiko until 2013. The company is known for its Ökovision Classic fund, which can be considered a pioneer in the field of ethical-ecological funds.

GLS Bank founded GLS Investment Management three years ago and has 1.7 billion euros under management. „We are proud to be the quality leader in the field of sustainable mutual funds,“ says the Bochum-based provider.

The specialist providers cannot claim to absolutely lead the market, though there are differences to companies such as Blackrock, DWS or Amundi. „The long experience speaks in favour of the ESG specialists. They have often been involved in sustainability for decades and are therefore particularly credible,“ says Härtel. In addition, they have developed their own valuation approaches and do not blindly trust ESG ratings from large agencies.

It is not surprising that the pure ESG managers would agree with this assessment. However, they differ in their presentation. „Ökoworld plays in the top league worldwide when it comes to sustainability,“ the company confidently states, pointing to many years of experience spanning almost 50 years. „During this time, we have built up highly professional and independent sustainability research," it adds. The company is also independent of banks and other financial investors.

GLS Investment Management and GLS Bank emphasise their approach. „We want to preserve and develop the foundations of life in order to be able to live in harmony with the environment in a socially just way – and have been doing so for 50 years," they say. GLS's aim is not to fulfil a trend, but to use money where it is needed from a socio-ecological perspective.

One of the larger players in the green niche is EB-Sustainable Investment Management (EB-Sim), a subsidiary of Evangelische Bank. Managing Director Michael Hepers emphasises the church background and a clear foundation of values. „Our claim is: Investments for a better world,“ says Hepers. This sets EB-Sim apart from many of its competitors, who only offer ESG products in addition to their existing range. „For us, sustainable investing is not a zeitgeist phenomenon that we follow for marketing reasons,“ says Hepers.

The EB Sim manager even goes so far as to say that his company is better positioned than many larger organisations. „As a pioneer in this field, we have a much greater wealth of experience than many other companies.“

The Dutch Triodos Bank is an international provider with Germany as an important market. Triodos Investment Management manages a total of 5.7 billion euros and sees itself as an Impact Investor. „We see Impact Investing as a driving force in the transition to a more inclusive and sustainable world,“ says Karim Chatti, responsible for the German business.

Triodos is trying to differentiate itself from other green competitors. „The first important thing here is to establish the difference between ESG and Impact Houses.“ While ESG investors are primarily concerned with minimising risk, Impact Investors look to the future and actively try to „bring about and accelerate positive and, above all, active change“ through their investments.

Whether a few million or a single-digit billion sum – the green specialists are very small compared to the large asset managers in the industry. At the same time, the effort involved in sustainability is huge.

From Ökoworld's point of view, this is not a problem, quite the opposite, saying that "we put more resources into the audits than the big providers.“ The company also emphasises that ultimately the assessments and decisions always remain with the company. „We don't allow ourselves to be talked into anything. We want to fulfil genuine and material sustainability and not mere transparency requirements that nobody understands anyway.“

„We just see that the current regulation has become too complicated and many investment advisors, private clients and smaller asset managers no longer understand it in detail,“ says Christoph Klein, Managing Partner of the boutique ESG Portfolio Management in Frankfurt. Unfortunately, this often leads to people ticking „No - I don't want a sustainable investment“ when asked about their preferences. „This repeats the effect of the Heat Pump Act – the opposite of the desired goal is achieved,“ says Klein.

Ökoworld notes that the regulatory requirements are voluminous. „It's all feasible, but of course it costs valuable resources that could be put to better use elsewhere," the company says. Much of it has nothing to do with sustainability. „So we are also doing a lot of duplicate or pointless work.“

The GLS experts are more moderate in their criticism- but are nonetheless still critical of the regulations („not always expedient“). Triodos generally welcomes the consistent regulation of sustainable investment offerings. „However, we are not in favour of the fact that the requirements currently only apply to investment products that advertise with terms such as „sustainable“, „green“ or „impact“. Providers of non-sustainable products do not have to disclose the damage they cause,“ says Chatti.

The pressure from the market in terms of ESG is therefore also affecting sustainability specialists, in a market phase in which many ESG players are having problems generating large volumes, says Scope analyst Härtel. „It's not enough to do good and talk about it – you also need the sales capacity", he says. And the products of green providers only become interesting for fund selectors above a certain volume.