Investing sustainably: Sustainable funds are particularly stable

Sustainable investments. With return opportunities.

The coronavirus lockdown showed how quickly our planet recovers from environmental impacts. However, with the lifting of the measures, the pendulum is swinging back. Why sustainable investing is important especially now – and what attractive growth opportunities sustainable funds with an ESG focus offer.

2020 – a year full of challenges and opportunities

For all of us, 2020 will linger long in the memory as the year in which everyday life was turned on its head by the COVID-19 pandemic. While the economy suffered, the environment recovered. This is because the abrupt cessation of our habitual way of life halted mass tourism and reduced industrial production along with road and air transportation, which in turn resulted in lower CO2 emissions.

However, experts warn that environmental pollution will return to pre-coronavirus levels within a short space of time. With the lifting of the lockdown measures, industrial production and the world economy have regained momentum – and the positive side effects of the pandemic on the environment are decreasing each day. More and more companies are therefore working on developing long-term solutions that focus on sustainable production and conscious consumption. This is the only way our planet can recover long-term.

lockdown caused a reduction of global co2 emission

The COVID-19 lockdown caused a reduction of global CO2 emissions

Source: Global Carbon Project, CDIAC & IEA

Sustainable investing is gaining in popularity

Investing in these solutions is very interesting for investors. This is because the right approaches will have enormous economic influence. It is estimated that realization of the Sustainable Development Goals of the United Nations could open up market opportunities amounting to some USD 12 trillion, while at the same time creating 380 million new jobs.

The figures of the US market show that sustainable investments were already playing an increasingly important role for investors last year. There, sustainable investment funds received record inflows: In 2019, the estimated net inflows in investment funds and ETFs amounted to a total of 20.6 billion US dollars, nearly four times as much as in the previous year.

net flows into sustainable funds in the us since 2009

Net inflows into sustainable funds in the US since 2009

Source: Morningstar Direct, 31.12.2019

Sustainable funds are particularly stable

Sustainable investments not only promise great growth potential, they also prove to be exceptionally stable compared to traditional investments. The COVID-19 era has proven this. According to the latest Global Sustainable Fund Flows report from the financial information group Morningstar, the global fund volume decreased by around 18 percent in the period from December 2019 to the end of March 2020.

Meanwhile, ESG funds recorded outflows one-third lower. Sustainable investments also proved to be robust with regard to performance: In the first semester of 2020, the MSCI World ESG Leaders Index outperformed the MSCI World Index by 0.92 percent.

ESG to prove an "evergreen" development

Although sustainable investments have gained in significance in recent years, many investors still believe that ESG investments are likely to prove a short-term market fad rather than a longer-term development. The actions of various regulatory authorities make it clear that this is a serious development.

In March 2020, the European Commission introduced guidelines for an EU-wide classification system for sustainable investments. The new guidelines create a comprehensible single language, enabling everyone to form an independent opinion. ESG will therefore remain topical and relevant to all companies.

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