The quarterly credit survey of the European Central Bank (EZB) showed for the third quarter that banks in the Eurozone are becoming more cautious in lending to companies. It therefore stands to reason that companies that need financing right now in the Corona crisis should use the capital market. We are actually seeing record issues on the capital market, but also the cancellation of IPOs and difficulties in placing bonds in total.
In this context, the last Adidas bond issue was quite astonishing. Adidas does not have to pay interest on 500 million Euro in the next 8 years. The bond was oversubscribed several times. Previous Adidas bonds yielded 1.25% – 2.25%, but these were not “sustainability bonds”. So the topic of sustainability seems interesting. The (sustainable) bond conditions are still formulated in a rather vague manner and are usually easy to meet. This is because there are still no uniform ESG (Environment, Social and Governance) standards. This is about to change. With the “Action Plan on Sustainable Finance”, the EU Commission has launched an extremely extensive legislative initiative to, among other things, Harmonize the ESG disclosure standards. The first regulatory technical standards are expected by December 30th of this year.
Dr. Gertrud Traud, chief economist at Landesbank Hessen-Thüringen, commented on the topic of sustainable investments on the 9th Investment Fund Day of the Börsenzeitung: “No company and no investor will get around the topic of sustainability. This topic will occupy us for the next 10 years and then it will be implemented by everyone and the question of whether it is sustainable or not will no longer be asked at all. “
Larry Fink, CEO of the world’s largest asset manager Black Rock, recently announced in an interview that he plans to trim his company towards sustainability. This also involves analyzing the portfolios for sustainable investments.
The trend should therefore continue to accelerate. On the one hand, driven by a corona-induced change of heart in society. On the other hand, it will be mandatory from next year that every retail customer must also be asked whether they want to invest sustainably. Both, increased customer demand and regulatory pressure, are ensuring that fund companies are bringing more and more sustainable portfolios onto the market.
Renell Bank is also currently working on setting up a fund that uses ESG rules for investment decisions.
Conclusion: The alignment of investment products according to sustainable criteria will continue inexorably and enables access to a steadily growing group of investors.
Marc Renell