Archiv der Kategorie: Indexselektion

Sustainable investment: Picture by Peggy and Marco-Lachmann-Anke from Pixabay

Sustainable investment = radically different?

Sustainable investment can be radically different from traditional investment. „Asset Allocation, Risk Overlay and Manager Selection“ is the translation of the book-title which I wrote in 2009 together with two former colleagues from FERI in Bad Homburg. Sustainability plays no role in it. My current university lecture on these topics is different.

Sustainability can play a very important role in the allocation to investment segments, manager and fund selection, position selection and also risk management. Strict sustainability can even lead to radical changes: More illiquid investments, lower asset class diversification, significantly higher concentration within investment segments, more active instead of passive mandates and different risk management. Here is why:

Central role of investment philosophy and sustainability definition for sustainable investment

Investors should define their investment philosophy as clearly as possible before they start investing. By investment philosophy, I mean the fundamental convictions of an investor, ideally a comprehensive and coherent system of such convictions (see Das-Soehnholz-ESG-und-SDG-Portfoliobuch 2023, p. 21ff.). Sustainability can be an important element of an investment philosophy.

Example: I pursue a strictly sustainable, rule-based, forecast-free investment philosophy (see e.g. Investment philosophy: Forecast fans should use forecast-free portfolios). To this end, I define comprehensive sustainability rules. I use the Policy for Responsible Investment Scoring Concept (PRISC) tool of the German Association for Asset Management and Financial Analysis (DVFA) for operationalization.

When it comes to sustainable investment, I am particularly interested in the products and services offered by the companies and organizations in which I invest or to which I indirectly provide loans. I use many strict exclusions and, above all, positive criteria. In particular, I want that the revenue or service is as compatible as possible with the Sustainable Development Goals of the United Nations (UN SDG) („SDG revenue alignment“). I also attach great importance to low absolute environmental, social and governance (ESG) risks. However, I only give a relatively low weighting to the opportunities to change investments („investor impact“) (see The Soehnholz ESG and SDG Portfolio Book 2023, p. 141ff). I try to achieve impact primarily through shareholder engagement, i.e. direct sustainability communication with companies.

Other investors, for whom impact and their own opportunities for change are particularly important, often attach great importance to so-called additionality. This means, that the corresponding sustainability improvements only come about through their respective investments. If an investor finances a new solar or wind park, this is considered additional and therefore particularly sustainable. When investing money on stock exchanges, securities are only bought by other investors and no money flows to the issuers of the securities – except in the case of relatively rare new issues. The purchase of listed bonds or shares in solar and wind farm companies is therefore not considered an impact investment by additionality supporters.

Sustainable investment and asset allocation: many more unlisted or alternative investments and more bonds?

In extreme cases, an investment philosophy focused on additionality would mean investing only in illiquid assets. Such an asset allocation would be radically different from today’s typical investments.

Better no additional allocation to illiquid investments?

Regarding additionality, investor and project impact must be distinguished. The financing of a new wind farm is not an additional investment, if other investors would also finance the wind farm on their own. This is not atypical. There is often a so-called capital overhang for infrastructure and private equity investments. This means, that a lot of money has been raised via investment funds and is competing for investments in such projects.

Even if only one fund is prepared to finance a sustainable project, the investment in such a fund would not be additional if other investors are willing to commit enough money to this fund to finance all planned investments. It is not only funds from renowned providers that often have more potential subscriptions from potential investors than they are willing to accept. Investments in such funds cannot necessarily be regarded as additional. On the other hand, there is clear additionality for investments that no one else wants to make. However, whether such investments will generate attractive performance is questionable.

Illiquid investments are also far from suitable for all investors, as they usually require relatively high minimum investments. In addition, illiquid investments are usually only invested gradually, and liquidity must be held for uncertain capital calls in terms of timing and amount. In addition, illiquid investments are usually considerably more expensive than comparable liquid investments. Overall, illiquid investments therefore have hardly any higher return potential than liquid investments. On the other hand, mainly due to the methods of their infrequent valuations, they typically exhibit low fluctuations. However, they are sometimes highly risky due to their high minimum investments and, above all, illiquidity.

In addition, illiquid investments lack an important so-called impact channel, namely individual divestment opportunities. While liquid investments can be sold at any time if sustainability requirements are no longer met, illiquid investments sometimes have to remain invested for a very long time. Divestment options are very important to me: I have sold around half of my securities in recent years because their sustainability has deteriorated (see: Divestments: 49 bei 30 Aktien meines Artikel 9 Fonds).

Sustainability advantages for (corporate) bonds over equities?

Liquid investment segments can differ, too, in terms of impact opportunities. Voting rights can be exercised for shares, but not for bonds and other investment segments. However, shareholder meetings at which voting is possible rarely take place. In addition, comprehensive sustainability changes are rarely put to the vote. If they are, they are usually rejected (see 2023 Proxy Season Review – Minerva).

I am convinced that engagement in the narrower sense can be more effective than exercising voting rights. And direct discussions with companies and organizations to make them more sustainable are also possible for bond buyers.

Irrespective of the question of liquidity or stock market listing, sustainable investors may prefer loans to equity because loans can be granted specifically for social and ecological projects. In addition, payouts can be made dependent on the achievement of sustainable milestones. However, the latter can also be done with private equity investments, but not with listed equity investments. However, if ecological and social projects would also be carried out without these loans and only replace traditional loans, the potential sustainability advantage of loans over equity is put into perspective.

Loans are usually granted with specific repayment periods. Short-term loans have the advantage that it is possible to decide more often whether to repeat loans than with long-term loans, provided they cannot be repaid early. This means that it is usually easier to exit a loan that is recognized as not sustainable enough than a private equity investment. This is a sustainability advantage. In addition, smaller borrowers and companies can probably be influenced more sustainably, so that government bonds, for example, have less sustainability potential than corporate loans, especially when it comes to relatively small companies.

With regard to real estate, one could assume that loans or equity for often urgently needed residential or social real estate can be considered more sustainable than for commercial real estate. The same applies to social infrastructure compared to some other infrastructure segments. On the other hand, some market observers criticize the so-called financialization of residential real estate, for example, and advocate public rather than private investments (see e.g. Neue Studie von Finanzwende Recherche: Rendite mit der Miete). Even social loans such as microfinance in the original sense are criticized, at least when commercial (interest) interests become too strong and private debt increases too much.

While renewable raw materials can be sustainable, non-industrially used precious metals are usually considered unsustainable due to the mining conditions. Crypto investments are usually considered unsustainable due to their lack of substance and high energy consumption.

Assuming potential additionality for illiquid investments and an impact primarily via investments with an ecological or social focus, the following simplified assessment of the investment segment can be made from a sustainability perspective:

Sustainable investment: Potential weighting of investment segments assuming additionality for illiquid investments:

Source: Soehnholz ESG GmbH 2023

Investors should create their own such classification, as this is crucial for their respective sustainable asset allocation.

Taking into account minimum capital investment and costs as well as divestment and engagement opportunities, I only invest in listed investments, for example. However, in the case of multi-billion assets with direct sustainability influence on investments, I would consider additional illiquid investments.

Sustainable investment and manager/fund selection: more active investments again?

Scientific research shows that active portfolio management usually generates lower returns and often higher risks than passive investments. With very low-cost ETFs, you can invest in thousands of securities. It is therefore no wonder that so-called passive investments have become increasingly popular in recent years.

Diversification is often seen as the only „free lunch“ in investing. But diversification often has no significant impact on returns or risks: With more than 20 to 30 securities from different countries and sectors, no better returns and hardly any lower risks can be expected than with hundreds of securities. In other words, the marginal benefit of additional diversification decreases very quickly.

But if you start with the most sustainable 10 to 20 securities and diversify further, the average sustainability can fall considerably. This means that strictly sustainable investment portfolios should be concentrated rather than diversified. Concentration also has the advantage of making voting and other forms of engagement easier and cheaper. Divestment threats can also be more effective if a lot of investor money is invested in just a few securities.

Sustainability policies can vary widely. This can be seen, among other things, in the many possible exclusions from potential investments. For example, animal testing can be divided into legally required, medically necessary, cosmetic and others. Some investors want to consistently exclude all animal testing. Others want to continue investing in pharmaceutical companies and may therefore only exclude „other“ animal testing. And investors who want to promote the transition from less sustainable companies, for example in the oil industry, to more sustainability will explicitly invest in oil companies (see ESG Transition Bullshit?).

Indices often contain a large number of securities. However, consistent sustainability argues in favor of investments in concentrated, individual and therefore mostly index-deviating actively managed portfolios. Active, though, is not meant in the sense of a lot of trading. In order to be able to exert influence by exercising voting rights and other forms of engagement, longer rather than shorter holding periods for investments make sense.

Still not enough consistently sustainable ETF offerings

When I started my own company in early 2016, it was probably the world’s first provider of a portfolio of the most consistently sustainable ETFs possible. But even the most sustainable ETFs were not sustainable enough for me. This was mainly due to insufficient exclusions and the almost exclusive use of aggregated best-in-class ESG ratings. However, I have high minimum requirements for E, S and G separately (see Glorious 7: Are they anti-social?). I am also not interested in the best-rated companies within sectors that are unattractive from a sustainability perspective (best-in-class). I want to invest in the best-performing stocks regardless of sector (best-in-universe). However, there are still no ETFs for such an approach. In addition, there are very few ETFs that use strict ESG criteria and also strive for SDG compatibility.

Even in the global Socially Responsible Investment Paris Aligned Benchmarks, which are particularly sustainable, there are still several hundred stocks from a large number of sectors and countries. In contrast, there are active global sustainable funds with just 30 stocks, which is potentially much more sustainable (see 30 stocks, if responsible, are all I need).

Issuers of sustainable ETFs often exercise sustainable voting rights and even engage, even if only to a small extent. However, most providers of active investments do no better (see e.g. 2023 Proxy Season Review – Minerva). Notably, index-following investments typically do not use the divestment impact channel because they want to replicate indices as directly as possible.

Sustainable investment and securities selection: fewer standard products and more individual mandates or direct indexing?

If there are no ETFs that are sustainable enough, you should look for actively managed funds, award sustainable mandates to asset managers or develop your own portfolios. However, actively managed concentrated funds with a strict ESG plus impact approach are still very rare. This also applies to asset managers who could implement such mandates. In addition, high minimum investments are often required for customized mandates. Individual sustainable portfolio developments, on the other hand, are becoming increasingly simple.

Numerous providers currently offer basic sustainability data for private investors at low cost or even free of charge. Financial technology developments such as discount (online) brokers, direct indexing and trading in fractional shares as well as voting tools help with the efficient and sustainable implementation of individual portfolios. However, the variety of investment opportunities and data qualities are not easy to analyze.

It would be ideal if investors could also take their own sustainability requirements into account on the basis of a curated universe of particularly sustainable securities and then have them automatically implemented and rebalanced in their portfolios (see Custom ESG Indexing Can Challenge Popularity Of ETFs ( In addition, they could use modern tools to exercise their voting rights according to their individual sustainability preferences. Sustainability engagement with the securities issuers can be carried out by the platform provider.

Risk management: much more tracking error and ESG risk monitoring?

For sustainable investments, sustainability metrics are added to traditional risk metrics. These are, for example, ESG ratings, emissions values, principal adverse indicators, do-no-significant-harm information, EU taxonomy compliance or, as in my case, SDG compliance and engagement success.

Sustainable investors have to decide how important the respective criteria are for them. I use sustainability criteria not only for reporting, but also for my rule-based risk management. This means that I sell securities if ESG or SDG requirements are no longer met (see Divestments: 49 bei 30 Aktien meines Artikel 9 Fonds).

The ESG ratings I use summarize environmental, social and governance risks. These risks are already important today and will become even more important in the future, as can be seen from greenwashing and reputational risks, for example. Therefore, they should not be missing from any risk management system. SDG compliance, on the other hand, is only relevant for investors who care about how sustainable the products and services of their investments are.

Voting rights and engagement have not usually been used for risk management up to now. However, this may change in the future. For example, I check whether I should sell shares if there is an inadequate response to my engagement. An inadequate engagement response from companies may indicate that companies are not listening to good suggestions and thus taking unnecessary risks that can be avoided through divestments.

Traditional investors often measure risk by the deviation from the target allocation or benchmark. If the deviation exceeds a predefined level, many portfolios have to be realigned closer to the benchmark. If you want to invest in a particularly sustainable way, you have to have higher rather than lower traditional benchmark deviations (tracking error) or you should do without tracking error figures altogether.

In theory, sustainable indices could be used as benchmarks for sustainable portfolios. However, as explained above, sustainability requirements can be very individual and, in my opinion, there are no strict enough sustainable standard benchmarks yet.

Sustainability can therefore lead to new risk indicators as well as calling old ones into question and thus also lead to significantly different risk management.

Summary and outlook: Much more individuality?

Individual sustainability requirements play a very important role in the allocation to investment segments, manager and fund selection, position selection and risk management. Strict sustainability can lead to greater differences between investment mandates and radical changes to traditional mandates: A lower asset class diversification, more illiquid investments for large investors, more project finance, more active rather than passive mandates, significantly higher concentration within investment segments and different risk management with additional metrics and significantly less benchmark orientation.

Some analysts believe that sustainable investment leads to higher risks, higher costs and lower returns. Others expect disproportionately high investments in sustainable investments in the future. This should lead to a better performance of such investments. My approach: I try to invest as sustainably as possible and I expect a normal market return in the medium term with lower risks compared to traditional investments.

First published in German on on Dec. 30th, 2023. Initial version translated by

ESG research criticism illustration with detective picture from Mariana Anatoneag from Pixabay

ESG research criticism? Researchpost #156

ESG research criticism: 13x new research on e-commerce, petrochemical and corruption problems, good and average sustainable performance, high transition risks, EU Taxonomy, Greenium, climate disaster effects, good investment constraints and private equity benchmarks (# shows SSRN full paper downloads as of Dec. 14th, 2023)

Social and ecological research (ESG research criticism)

Brown e-commerce: Product flows and GHG emissions associated with consumer returns in the EU by Rotem Roichman, Tamar Makov, Benjamin Sprecher, Vered Blass, and Tamar Meshulam as of Dec. 6th, 2023 (#5):“Building on a unique dataset covering over 630k returned apparel items in the EU … Our results indicate that 22%-44% of returned products never reach another consumer. Moreover, GHG emissions associated with the production and distribution of unused returns can be 2-14 times higher than post-return transport, packaging, and processing emissions combined“ (abstract).

US financed European petrochemicals: Toxic Footprints Europe by Planet Tracker as of December 2023: “Petrochemicals, which provide feedstocks for numerous products embedded in the global economy, carry a significant environmental footprint. One of the most important is toxic emissions. The financial market appears largely unconcerned by toxic emissions. This could be for several reasons: • perhaps because they are viewed as an unpriced pollutant or investors’ focus remains on carbon rather than other discharges or for those monitoring the plastic industry the spotlight is on plastic waste rather than toxic releases. In the Trilateral Chemical Region of Europe – an area consisting of Flanders (Belgium), North Rhine-Westphalia (Germany), Planet Tracker identified 1,093 facilities …. These facilities have released and transferred 125 million tonnes of chemicals since 2010 resulting in an estimated 24,640 years of healthy life being lost and 57 billion fractions of species being potentially affected. … BASF and Solvay are the most toxic polluters in the region, appearing in the top 5 of all four metrics analysed (physical releases, ecotoxicity, human toxicity and RSEI hazard).  The financiers behind these toxic footprints are led by BlackRock (5.4% of total investments by equity market value), Vanguard (5.2%) and JPMorgan Chase (3.6%). In terms of debt financing, Citigroup leads with 6.4% of total 10-year capital underwriting (including equity, loans and bonds), followed closely by JPMorgan Chase (6.3%) and Bank of America (5.2%)“ (p. 3).

Corruption Kills: Global Evidence from Natural Disasters by Serhan Cevik and João Tovar Jalles from the International Monetary Fund as of Nov. 2nd, 2023 (#12): “… we use a large panel of 135 countries over a long period spanning from 1980 to 2020 … The empirical analysis provides convincing evidence that widespread corruption increases the number of disaster-related deaths … the difference between the least and most corrupt countries in our sample implies a sixfold increase in the number of deaths per population caused by natural disaster in a given year. Our results show that this impact is stronger in developing countries than in advanced economies, highlighting the critical relationship between economic development and institutional capacity in strengthening good governance and combating corruption“ (p. 11/12).

Investment ESG research criticsm

Complex sustainability: Sustainability of financial institutions, firms, and investing by Bram van der Kroft as of Dec. 7th, 2023 (#22): “… financial institutions will take on additional risk in ways unpriced by regulators when facing financial constraints. Throughout the paper, we provide evidence that this additional risk-taking harms society as banks and insurance corporations acquire precisely those assets most affected in economic downturns” (p. 194) … “we find for over four thousand listed firms in 77 countries, as two-thirds of firms substantively improve their sustainable performance when institutional pressure is imprecise and increases, while one-third of firms are forced to start symbolically responding” (p. 196) … “One critical assumption underlining .. sustainable performance advances is that socially responsible investors can accurately identify sustainable firms. In practice, we show that these investors rely on inaccurate estimates of sustainable performance and accidentally “tilt the wrong firms” (p. 196) … “First, we find that MSCI IVA, FTSE, S&P, Sustainalytics, and Refinitiv ESG ratings do not reflect the sustainable performance of firms but solely capture their forward-looking sustainable aspirations. On average, these aspirations do not materialize up to 15 years in the future” (p. 84). …“Using unique identification in the real estate market and property-level sustainable performance information, we find that successful socially responsible engagement improves the sustainable performance of firms”(p. 196). My comment regarding the already published ESG rating criticism: Not all rating agencies work in the criticized way. My main ESG ratings supplier shifted its focuses to actual from planned sustainability (see my Researchpost #90 as of July 5th, 2022 relating to this paper: Tilting the Wrong Firms? How Inflated ESG Ratings Negate Socially Responsible Investing under Information Asymmetries).

ESG research criticism (1)? Comment and Replication: The Impact of Corporate Sustainability on Organizational Processes and Performance by Andrew A. King as of Dec. 7th, 2023 (#186): “Do High Sustainability companies have better financial performance than their Low Sustainability counterparts? An extremely influential publication in Management Science, “The Impact of Corporate Sustainability on Organizational Processes and Performance”, claims that they do. … after reviewing the report, I conclude that its critical findings are unjustified by its own evidence: its main method appears unworkable, a key finding is miscalculated, important results are uninterpretable, and the sample is biased by survival and selection. … Despite considering estimates from thousands of models, I find no reliable evidence for the proposed link between sustainability and financial performance” (abstract). My comment: If there is no negative effect of sustainability on performance, shouldn’t all investors invest 100% sustainably

ESG research criticism (2)? Does Corporate Social Responsibility Increase Access to Finance? A Commentary on Cheng, Ioannou, and Serafeim (2014) by Andrew A. King as of Dec. 12th, 2023 (#7): “Does Corporate Social Responsibility (CSR) facilitate access to finance? An extremely influential article claims that it does … I show that its research method precludes any insight on either access to finance or its connection to CSR. … I correct the original study by substituting more suitable measures and conducting further analysis. Contrary to the original report, I find no robust evidence for a link between CSR and access to finance” (abstract).

High transition risk: The pricing of climate transition risk in Europe’s equity market by Philippe Loyson, Rianne Luijendijk, and Sweder van Wijnbergen as of Aug. 22nd, 2023 (#46): “We assessed the effect of carbon intensity (tCO2/$M) on relative stock returns of clean versus polluting firms using a panel data set consisting of 1555 European companies over the period 2005-2019. We did not find empirical evidence that carbon risk is being priced in a diversified European equity portfolio, implying that investors do not seem to be aware of or at least do not require a risk premium for the risk they bear by investing in polluting companies“ (p. 32). My comment: Apparently, at least until 2019, there has not been enough sustainable investment to have a carbon risk impact

Green indicator confusion: Stronger Together: Exploring the EU Taxonomy as a Tool for Transition Planning by and CDP as of Dec. 5th, 2023: „We find that out of the 1,700 NFRD (Sö: EU’s Non-Financial Reporting Directive) companies that published EU Taxonomy reports this year, around 600 identified their revenues and spending as part of their transition plans, and approximately 300 have validated science-based targets, both of which correlate to higher taxonomy alignment overall. There is a large dispersion of eligibility across companies within similar sectors which suggests that individual companies are involved in a variety of economic activities. This influences the low correlation between corporate GHG emissions and Taxonomy eligibility and alignment, as non-eligibility can be the result of exposure to either very high-impact or very low-impact economic activities. We observe that higher taxonomy alignment does not necessarily lead to lower carbon intensity when comparing companies within sectors. It is important to highlight that the largest source of corporate emissions might not always be well reflected in revenue shares” (p. 38). My comment: My experience is that the huge part of Scope 3 CO2 emissions and almost all non-CO2 emissions like methane are still seriously neglected by many corporations and investors

Greenium: Actions Speak Louder Than Words: The Effects of Green Commitment in the Corporate Bond Market by Peter Pope, Yang Wang, and Hui Xu as of Nov. 22nd, 2023 (#64): “This paper studies the effects of green bond issuance on the yield spreads of other conventional bonds from the same issuers. A traditional view of new bond issuance suggests that new bonds (whether green or brown) will increase secondary market bond yields if higher leverage increases default risk and dilutes creditors’ claim over assets. However, we find that the issuance of green bonds reduces conventional bond yield spreads by 8 basis points in secondary markets, on average. The effect is long-lasting (beyond two years) … An event study shows that the “bond” attribute of the green bonds still increases the yield spreads of outstanding conventional bonds by 1 basis point. It is the “green” attribute that lowers the yield spreads and ultimately dominates the net effects. … we show that socially responsible investors increase their demand for, and hold more, conventional bonds in their portfolios following the issuance of green bonds … we show that shareholders submit fewer environment-related proposals following green bond issuance. … Finally, our analysis highlights that green bonds give rise to positive real effects, though such effects are confined to the issuer“ (p. 42/43).

Costly values? Perceived Corporate Values by Stefano Pegoraro, Antonino Emanuele Rizzo, and Rafael Zambrana as of Dec. 4th, 2023 (#54): “…. analyzing the revealed preferences of values-oriented investors through their portfolio holdings … Using this measure of perceived corporate values, we show that values-oriented investors consider current and forward-looking information about corporate misconduct and controversies in their investment decisions. We also show that values-oriented investors sacrifice financial performance to align their portfolios with companies exhibiting better corporate values and lower legal risk” (p. 24). My comment: According to traditional investment theories, lower (ESG or other) risk should lead to lower returns. Any complaints about that?

Some investor impact: Propagation of climate disasters through ownership networks by Matthew Gustafson, Ai He, Ugur Lel, and Zhongling (Danny) Qin as of Dec. 5th, 2023 (#127): “We find that climate-change related disasters increase institutional investors’ awareness of climate change issues and accordingly these investors engage with the unaffected firms in their portfolios to influence corporate climate policies. In particular, we observe that such institutional investors vote in greater support of climate-related shareholder proposals at unaffected firms only after getting hit by climate change disasters in their portfolios and compared to other institutional investors. … In the long-run, firm-level GHG emissions and energy usage cumulatively decline at the same time as the unaffected firms adopt specific governance mechanisms such as linking their executive pay policies to GHG emission reductions, suggesting that changes in governance mechanisms potentially incentivize firms to internalize some of the negative externalities from their activities. … our results are more pronounced in brown industries“ (p. 26). My comment: When changing executive pay, negative effects have to be mitigated, see Wrong ESG bonus math?

Other investment research

Good constraints: Performance Attribution for Portfolio Constraints by Andrew W. Lo and Ruixun Zhang as of Nov. 1st, 2023 (#57): “While it is commonly believed that constraints can only decrease the expected utility of a portfolio, we show that this is only true when they are treated as static. … our methodology can be applied to common examples of constraints including the level of a particular characteristic, such as ESG scores, and exclusion constraints, such as divesting from sin stocks and energy stocks. Our results show that these constraints do not necessarily decrease the expected utility and returns of the portfolio, and can even contribute positively to portfolio performance when information contained in the constraints is sufficiently positively correlated with asset returns“ (p. 42). My comment: Traditional investment constraints are typically used to reduce risks. Looking at a actively managed funds, that does not always work as expected. Maybe responsible investment constraints are better than traditional ones?

PE Benchmark-Magic: Benchmarking Private Equity Portfolios: Evidence from Pension Funds by Niklas Augustin, Matteo Binfarè, and  Elyas D. Fermand as of Oct. 31st, 2023 (#245): “We document significant heterogeneity in the benchmarks used for US public pension fund private equity (PE) portfolios. … We show that general (Soe: investment) consultant turnover predicts changes in PE benchmarks. … we find that public pension funds only beat their PE benchmarks about 50% of the time, that they tend to use public market benchmark indices that underperform private market benchmark indices, and that their benchmarks have become easier to beat over the last 20 years“ (abstract).


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Nachhaltige ETF-Portfolios

Nachhaltige ETF-Portfolios seit 2015: Vor- und Nachteile

Nachhaltige ETF-Portfolios: Ich der ESG ETF Portfoliopionier. Und immer wieder werde ich gefragt, warum ich so kritisch in Bezug auf nachhaltige ETFs bin. Hier sind meine wichtigsten Argumente:


+ ETFs sind regelbasiert und transparent

+ ETS sind günstig

+ Es werden immer mehr und nachhaltigere ETFs angeboten

+ Viele Vermittler und Vermögensverwalter mögen ETF


– ETFs sind meist an kapitalgewichteten Indizes orientiert und enthalten deshalb oft auch wenig-nachhaltige Branchen und Länder

– ETFs sind meist stark diversifiziert und enthalten deshalb in der Regel auch Wertpapiere von wenig nachhaltigen Emittenten

– Nachhaltige ETFs nutzen oft nur unvollständige Ausschlusskriterien und ESG-Selektionsregeln wie Best-in-Class statt Best-in-Universe und aggregierte statt separate ESG-Ratings

Ziel meiner ETF-Portfolios ist es, die Vorteile zu nutzen und die Nachteile so gut wie möglich zu reduzieren. Dazu biete ich Core und Satellite-Portfolios an, allerdings nur B2B, also für Vermögenverwalter und Vermittler.

ESG ETF Core Portfolios (Nachhaltige ETF-Portfolios)

  • Start Ende 2015 als ESG ETF-Portfolio
  • Konzeptionell möglichst nachhaltige ETFs: Start mit Socially Responsible Investment (SRI) ETFs und heute SRI PAB (Paris Aligned Benchmark) und andere, die anhand von separaten E, S und G Best-in-Universe Ratings selektiert werden
  • Angebot von Multi-Asset-, Aktien-, Anleihen-, Income- und risikogesteuerte ETF-Portfolios

SDG ETF Satellite Portfolios (Nachhaltige ETF-Portfolios)

  • Start 2019 als ETF-Portfolio mit Themen-ETFs, die möglichst im Einklang mit den nachhaltigen Entwicklungszielen der Vereinten Nationen (SDG) stehen wie erneuerbare Energien, Gesundheit, nachhaltige Ernährung und Infrastruktur
  • Keine ETFs mit mehr als 5% Allokationen zu unerwünschten Ländern wie China
  • ETF-Selektion mit separaten E, S und G Best-in-Universe sowie SDG-Ratings
  • Fokus auf ETFs aus kleinen und mittelgroßen Unternehmen, damit Überschneidungen mit Core-Portfolios möglichst vermieden werden
  • Angebot einer risikogesteuerten Variante

Core- und Satellite Portfolio-Vergleich

Das Multi-Asset Core-Portfolio enthält aktuell 6 ETFs von 5 Anbietern mit >3.000 Wertpapieren und kostet 0,21% p.a.. Das Satellite-Portfolio beinhaltet 9 ETFs von 5 Anbietern mit >1.000 Aktien zu Kosten von 0,42% p.a.. Damit sind die Portfolios stark risikogestreut und relativ günstig. Und die Performance war bisher typischerweise besser als die von traditionellen aktiv gemanagten Fonds und ähnlich wie die von traditionellen ETF-Portfolios. So spricht nur noch wenig für traditionelle ETF-Portfolios.

Nachhaltige ETF-Portfolios: Fazit

Mit direkten (Aktien-)Portfolios ist mehr mehr Nachhaltigkeit als mit ETFs möglich. Nach meiner eigenen Nachhaltigkeitsbewertung haben die Core-Portfolios einen Nachhaltigkeitsscore von 50% und die Satellite-Portfolios einen von 75% während direkte Aktienportfolios 100% erreichen können. Aber für alle Fans von diversifizieren Portfolios sind solche strengstmöglich nachhaltigen ETF-Portfolios sehr attraktiv. Meine Geschäftspartner und ihre privaten und Stiftungskunden scheinen jedenfalls zufrieden zu sein.

Weiterführende Informationen

Portfolioregeln, Hintergründe, Nachhaltigkeitspolitik etc: Das-Soehnholz-ESG-und-SDG-Portfoliobuch.pdf ( und zum Beispiel Artikel 9 ETF-Portfolios bzw. PAB ETF-Portfolios sind attraktiv – Responsible Investment Research Blog (

Performances: Soehnholz ESG (und „Historische Zeitreihen der Portfolios, ebenda) und letzter Blogpost dazu Soehnholz ESG 2021: Passive Allokationsportfolios und Deutsche ESG Aktien besonders gut – Responsible Investment Research Blog (

Nature picture as illustration for female ESG investing research blog

Female ESG power and more (Researchposting 111)

Female ESG power: >10x new research on human rights ratings, child care, female ESG power, climate defaults, brown offloads, green consumers, green benchmarks, transition risks, ESG shocks, leasing, UN PRI, timberland and hedge funds by Gaizka Ormazabal, Frauke Peter, Joshua Rauh, Thierry Roncalli et al.

Social research: Female ESG power

Human rights ratings? ESG Ratings and Human Rights Due Diligence – How can ESG ratings be used to assess the human rights due diligence practices of companies? by Emil Sirén Gualinga as of Jan.4th, 2023 (#45): “… the paper examined the relationship between ESG ratings and Corporate Human Rights Benchmark (CHRB) scores. The findings indicate that in general, ESG scores are not a good proxy for assessing companies’ human rights due diligence processes and practices. Moreover, whereas the relationship between ESG ratings and CHRB scores are inconsistent, a low score on Refinitiv and ISS may indicate that a company lacks adequate human rights due diligence processes. Conversely, a high score on Refinitiv or ISS is not necessarily an indicator of strong human rights due diligence processes. Lastly, the paper also acknowledges that the CHRB itself has limitations, as it does not preclude companies with a track record of being involved in human rights abuses from achieving high scores” (p. 15).

Social application-help: Early Child Care and Labor Supply of Lower-SES Mothers: A Randomized Controlled Trial by Henning Hermes, Marina Krauß, Philipp Lergetporer, Frauke Peter, Simon Wiederhold as of Jan.3rd, 2023 (#16): “We present experimental evidence that enabling access to universal early child care for families with lower socioeconomic status (SES) increases maternal labor supply. Our intervention provides families with customized help for child care applications … The treatment increases lower-SES mothers’ full-time employment rates by 9 percentage points (+160%), household income by 10%, and mothers’ earnings by 22%. … Overall, the treatment substantially improves intra-household gender equality in terms of child care duties and earnings“ (abstract).

Female ESG power: The Eco Gender Gap in Boardrooms by Po-Hsuan Hsu, Kai Li, and Yihui Pan as of Jan. 3rd, 2023 (#151): “Using novel firm- and facility-level measures of corporate environmental performance over the period 2002–2021, we establish a robust and positive association between board gender diversity and corporate environmental performance. This relation appears to be causal … We find that female directors bring more expertise on sustainability in boardrooms than male directors. Female directors are more likely to sit on sustainability-related committees and key monitoring committees than male directors. Boards with more female directors are more likely to link top executives’ compensation to corporate ESG performance” (p. 34). My comment: Similar results see 140227 ESG_Paper_V3 1 (

Advert for German investors: “Sponsor” my research by investing in and/or recommending my article 9 mutual fund. I focus on social SDGs and midcaps and use separate E, S and G best-in-universe minimum ratings. The fund typically scores very well in sustainability rankings, e.g. this free new tool, and the performance is relatively good: FutureVest Equity Sustainable Development Goals R – DE000A2P37T6 – A2P37T

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Trustee or steward? Photo of Eicklingen as illustration

Trustee or steward? Researchblogposting 104

Trustee or steward? 13x new research on climate tech and finance, interest rates, plant-based food, greenwashing, reporting, engagement, benchmarks, age, PFOF, and private equity by Richard Ennis at al.

Social and ecological research: Trustee or steward?

Climate tech advantage: Empirically grounded technology forecasts and the energy transition Rupert Way, Matthew C. Ives, Penny Mealy, and J. Doyne Farmer as of Sept. 21st, 2022: “Most energy-economy models have historically underestimated deployment rates for renewable energy technologies and overestimated their costs. … Here, we use an approach based on probabilistic cost forecasting methods that have been statistically validated by backtesting on more than 50 technologies. … Compared to continuing with a fossil fuel-based system, a rapid green energy transition will likely result in overall net savings of many trillions of dollars—even without accounting for climate damages or co-benefits of climate policy” (p. 1).

Climate interest risk: The effects of climate change on the natural rate of interest: a critical survey by Francesco Paolo Mongelli, Wolfgang Pointner, and Jan Willem van den End as of Nov. 1st, 2022 (#37): “This survey is the first to systematically review the possible effects of climate change on the natural rate of interest. While r* is a theoretical concept, it is used as a benchmark by central banks to assess the stance of their monetary policy and the room for policy manoeuvre. … In most cases, we find that climate change would have a rather dampening effect on r*, which implies a narrower room for manoeuvre for central banks. … the uncertain impact of climate change on main r* may call for an increasing flexibility in the monetary policy strategy, both in terms of objectives and time horizon. …. An orderly transition will mitigate the economic and financial risks of climate change and thereby also prevent potential downward effects on r*. In addition, active fiscal policies to mitigate climate change might also spur investment demand and thereby put upward pressure on the natural rate” (p. 26/27).

Advert for German investors: “Sponsor” my research e.g. by buying my Article 9 fund. The minimum investment is approx. EUR 50 and so far return and risks are relatively good: FutureVest Equity Sustainable Development Goals R – DE000A2P37T6 – A2P37T: I focus on social SDGs and midcaps and use best-in-universe as well as separate E, S and G minimum ratings.

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Unsustainable Bonds: Naturbild von Andres Dressler zur Illustration

Unsustainable bonds? Researchposting 102

Unsustainable bonds? 20x new research on climate risk, real estate, health, Trump, carbon credits, CDS, bank loans, bonds, interest rates, ESG indexing, pensions, gender, infrastructure, private equity, investment apps, ESG fintechs, climate AI by Roland Fuess, Tabea Bucher-Koenen, Paul Pudschedl, Markus Leippold et al.

Social and Ecological Research: Unsustainable bonds?

Longer hot: 800,000 Years of Climate Risk by Tobias Adrian, Nina Boyarchenko, Domenico Giannone,  Ananthakrishnan Prasad, Dulani Seneviratne, and Yanzhe Xiao as of September 9th, 2022 (#22): “… we study how climate evolves over the past 800,000 years … We find that the temperature-CO2 dynamics are non-linear, so that large deviations in either temperature or CO2 concentrations take a long time to correct … even conditional on the net-zero 2050 scenario, there remains a significant risk of elevated temperatures for at least a further five millennia” (p. 26/27).

Reduce green incentives? The Low-Carbon Rent Premium of Residential Buildings by Angelika Brändle, Roland Füss, Jörg Schläpfer, and Alois Weigand as of September 22nd, 2022 (#53): “The operation of residential real estate accounts for a large part of worldwide greenhouse gas emissions …. we analyze 39,791 rental contracts from 2,438 residential properties in the Switzerland … our results suggest that apartments in low-carbon buildings have higher net rents compared to dwellings which emit more carbon emissions. … the higher willingness-to-pay for low-carbon housing is not decisively driven by a tenant’s higher preference for living in an environmentally-friendly apartment. … based on capitalization rates from 432 transactions, we suggest that the market value is on average higher for carbon neutral apartment properties due to lower expected risk premiums. … incentive structures for sustainable housing have to be carefully evaluated by policy makers as higher market values of low-carbon buildings compensate investors for cutting CO2 emissions” (p. 17/18).

Advert for German investors: “Sponsor” my free research e.g. by buying my Article 9 fund. The minimum investment is around EUR 50. FutureVest Equity Sustainable Development Goals R – DE000A2P37T6 – A2P37T: I focus on social SDGs and midcaps and use best-in-universe as well as separate E, S and G minimum ratings.

For my approach to this blog see 100 research blogposts since 2018 – Responsible Investment Research Blog (

For more current research please go to page 2 (# indicates the number of SSRN downloads on November 1st):

Picture of a tree as symbol for the title stewardship

Stewardship etc. (Researchblog #100)

Stewardship: >20x new research on inequality, biodiversity, ESG incidents, carbon credits and indexing, greenium, stewardship, gender, social taxonomy, withdrawals and art investing by authors such as Florian Berg, Laurens Swinkels and many more

Social and Ecological Research: Stewardship

Arguments for climate action: ‚It Makes No Difference What We Do‘: Climate Change and the Ethics of Collective Action by Jonathan Crowe as of Oct. 5th, 2022 (#7): “It has become progressively more difficult to deny the existence of anthropogenic climate change as the scientific evidence has mounted …. Those who are opposed to such action sometimes justify their stance by suggesting that even though climate change is real and dangerous, there is no obligation to do anything further about it, because this would be futile … I argued that (1) everyone has a duty to do their share for the global common good, which entails combating climate change; (2) even micro-contributions to climate change plausibly create a moral responsibility to counteract their effects; (3) in any case, we would still have a duty to combat climate change even if, contrary to the evidence, this made no difference whatsoever to the outcome; (4) this result can be explained by appealing to the fact that not doing one’s share constitutes a kind of individual and collective self-harm” (p. 13). My comment: This is in line with my approach, see e.g. Absolute and Relative Impact Investing and additionality – Responsible Investment Research Blog (

Advert for German investors: “Sponsor” my free research e.g. by buying my Article 9 fund. The minimum investment is around EUR 50. FutureVest Equity Sustainable Development Goals R – DE000A2P37T6 – A2P37T: I focus on social SDGs and midcaps and use best-in-universe as well as separate E, S and G minimum ratings.

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ESG regulation: Das Bild von Thomas Hartmann zeigt Blumen in Celle

ESG overall (Researchblog #91)

ESG overall: >15x new research on fixed income ESG, greenium, insurer ESG investing, sin stocks, ESG ratings, impact investments, real estate ESG, equity lending, ESG derivatives, virtual fashion, bio revolution, behavioral ESG investing

Advert: Check my article 9 SFDR fund FutureVest Equity Sustainable Development Goals (-2,9% YTD). With my most responsible stock selection approach I focus on social SDGs and midcaps and use best-in-universe as well as separate E, S and G minimum ratings.

Continue on page 2 (# indicates the number of SSRN downloads on July 25th):

Bild zum Beitrag ESG skeptical zeigt eine Ansicht einer Allee aus dem Celler Französischen Garten

ESG skeptical research (Researchblog #90)

ESG skeptical: >15x new and skeptical research on ESG and SDG investments, performance, cost of capital, reporting, ratings, impact, bonifications and artificial intelligence

Advert: Check my article 9 SFDR fund FutureVest Equity Sustainable Development Goals. With my most responsible selection approach I focus on social SDGs and midcaps and use best-in-universe as well as separate E, S and G minimum ratings.

Continue on page 2 (# indicates the number of SSRN downloads on July 5th):

Heidebild als Illustration für Proven Impact Investing

ESG ok, SDG gut: Performance 1. HJ 2022

ESG ok, SDG gut: Im ersten Halbjahr 2022 haben meine Trendfolgeportfolios sowie die Portfolios, die sich an den nachhaltigen Entwicklungszielen der Vereinten Nationen ausrichten (SDG), zwar auch an Wert verloren, aber dafür relativ gut gegenüber Vergleichsgruppen performt. Das gilt besonders auch für den FutureVest Equities SDG Fonds. Anders als die meist OK gelaufenen globalen haben spezialisierte ESG Portfolios der Soehnholz ESG GmbH im ersten Halbjahr schlechter als traditionelle Vergleichsportfolios abgeschnitten. Dafür war deren Performance in der Vergangenheit oft überdurchschnittlich.

Werbemitteilung: Kennen Sie meinen Artikel 9 Fonds FutureVest Equity Sustainable Development Goals: Fokus auf soziale SDGs und Midcaps, Best-in-Universe Ansatz, getrennte E, S und G Mindestratings.

Auf Seite 2 folgt die Übersicht der Halbjahresrenditen für die 15 nachhaltigen und zwei traditionellen Portfolios von Soehnholz ESG sowie für meinen Fonds.