Sustainable investing is more popular than ever before — and a growing number of people are becoming interested in impact investing in Germany. However, there’s also some scepticism when it comes to sustainable investments.
A good portion of that scepticism comes down to the question of whether impact investing actually makes a tangible difference for the environment and society. And if it does, are profits possible with such investments? Or do you essentially have the choice between high returns and ethical investing?
At Yova, we’ve made it possible to invest in sustainable and socially responsible companies — without compromising your returns. In this article, we’ll demonstrate how it’s possible to achieve market-rate returns while investing in an ethically sustainable way. You’ll also discover several companies that appear in Yova portfolios and how these companies are helping to solve the biggest issues of our time. Finally, we’ll show you how you can invest in a simple and uncomplicated way to benefit yourself, the environment, and society.
Why should you care about sustainable investing?
We’re facing some of the most significant issues in human history, from climate crisis to financial and social problems. For example, far too many people still don’t have access to clean water, medical care or education. Solutions and alternatives need to be found in the automotive, packaging, food and cosmetics industries. And thousands of researchers, activists, companies and politicians around the world are working on creating a better world.
These efforts are being rewarded — groundbreaking inventions and developments are being made in more and more areas that promise a better future for us all. Furthermore, the political will to sharpen climate laws is becoming stronger and stronger.
As an individual, you’re also doing the best you can to be environmentally conscious, sustainable and ethically responsible. We can’t be sure, but we suspect you probably drink oat milk (or another dairy alternative), eat less meat, and are conscious about where your food comes from. You probably recycle and avoid disposable plastic. If we had a graph that charted your personal progress, it’d show that over the past ten years, you’ve reduced your CO2 footprint significantly.
All of these are essential steps towards a better future. But there’s a way to do more and to make a real difference on a grand scale.
Here’s the unpleasant truth: If you’re saving your money in the account of a big bank, you’re most likely unknowingly and unwillingly supporting corporations or businesses responsible for those giant problems. For many German banks, sustainable investing is still not a priority. (A recent study by the WWF on sustainability in the banking business clearly shows this.)
And when it comes to investments, you might even be supporting companies whose practices completely go against all your convictions. This isn’t your fault.
Large companies and corporations can make a difference far more quickly than a single person can. Corporate giants have an enormous impact with their large workforce, huge budgets and the tremendous political power they wield. But you’ve got power too — you can choose how to invest.
With impact investing in Germany, you can invest your money in a way that doesn’t finance unethical and environmentally harmful business methods. On the contrary, by sustainable investing, you can make our world a better place.
Sustainable investing does two things at once: Firstly, it supports companies that are already working for a better future. Secondly, by sustainable investing, you also persuade corporations to orient towards topics that might not have been considered priorities before, such as environmental protection or humanitarian efforts.
The more people choose sustainable investing, the more companies will rethink their approach to sustainability to make sure that company shares continue to sell in the future.
If you are leading a healthy and environmentally friendly lifestyle (and like we said, we suspect you do), then you need the right financial product to go with it. After all, investing in a sustainable future is currently the most powerful tool on the road to a better world.
Greenwashing in sustainability funds
Sustainable investing is currently one of the most important megatrends in the financial world. However, there is a major problem — the term “sustainable investment” isn’t protected in any way. This means that a bank or asset manager can offer a “sustainable investment” product that includes any company, in any industry. As we have written about previously, some major sustainability funds include companies like Nestlé, Total SA and Saudi Arabian mining.
Furthermore, many companies are now trying to improve their image by “greenwashing“. This is a practice in which companies that are neither environmentally friendly nor ethically responsible try to give themselves a makeover through sophisticated PR campaigns. Recognising whether a company is greenwashing its image is often complicated for laypersons.
At Yova, we make maximum transparency a central part of our corporate philosophy. We do not invest in companies that employ “greenwashing”, nor do we invest in opaque funds. Our customers invest directly in topics and companies that are in line with their personal values. Moreover, we only include companies in our universe that are trying to make the world better thanks to the environmental and social impact of their products and services. For example, we promote companies addressing the topics of renewable energy, transport of the future, access to clean drinking water, and many others.
Investing in a socially responsible and ecological way: How does it work in practice?
Now you’re aware why it’s important to start investing money sustainably. But what does investing ecologically actually mean? For Yova, it means investing in companies that have a strong “handprint” impact topic, which means that the company’s products and services have a positive impact on the world. We have identified twelve handprint topics we believe are crucial. We’ll explain this more in detail by discussing three of them below. These impact themes ensure that you invest in a better future.
For us, renewable energy is one of the essential investment fields for sustainable investing strategies. After all, electricity and heat generation are responsible for almost 50% of the global CO2 emissions. To counteract climate change, cost-effective and sustainable alternatives to fossil fuels urgently need to be found. Sustainable investing, such as investing in wind energy, makes a vital contribution to a better world.
To find the best companies in this field, we take two different approaches at Yova. We analyse the share of energy produced from renewable sources (in the case of utility companies), or we examine the percentage of revenue generated by the production, supply and installation of advanced equipment to support this industry.
Despite living in the 21st century, people in many developed and developing countries don’t have access to clean water. That’s why clean water is one of the most critical impact issues for us at Yova. With us, you’ll invest in companies that improve access to clean water and reduce water waste and pollution.
To identify Clean Water champions, we audited annual reports to assess the share of revenue a company generates through the supply of water, wastewater treatment, or the development of related technologies. In scoring companies, we emphasize those companies most that develop technologies and equipment to help increase access to and reduce wastage and pollution of water.
Access to medicine
Everyone in the world should have the right to access healthcare. Unfortunately, this is not the case, especially since vital or life-saving drugs are still too expensive for many people. Which is why with this impact topic we support companies that want to ensure better medical care for all people in the world.
Investing in an ethically sustainable way: Does it really make a difference?
The idea of sustainable investing is brilliant: Invest your money profitably and create a better world at the same time. Does that sound too good to be true? Don’t worry; countless success stories prove that you can make a difference with impact investing. Keep reading for the examples of Tesla and Ørsted.
Tesla: Proof of success for sustainable investing
Electric vehicles could make a significant contribution to solving our climate crisis. Rising global temperatures and electricity overuse remain the most considerable burden on our planet, but road transport is a close second. Tesla is one of the leading manufacturers of electric vehicles. Initially dismissed as an option for eccentric affluent individuals, Tesla is now one of the most promising car companies in the world. The company is even planning to open a new plant in Brandenburg in 2021.
The success of e-car manufacturers and Tesla has now also led the major German car manufacturers to rethink electromobility. Sustainable investing in Tesla didn’t just help one environmentally conscious company to be more successful, but it’s also encouraged other companies to invest in sustainable technologies.
Tesla also recently presented a new report in which the company sets out how it intends to operate in order to become even more environmentally friendly in the future. For example, Tesla has made great strides regarding recycling of spent batteries and is planning to eliminate the cobalt content of its vehicles in the future. Of course, there’s certain criticism to this Impact Report, and Tesla still has to solve a number of serious sustainability problems. However, we believe that the company is moving in a great direction and is inspiring many other car manufacturers to invest in environmentally friendly electrical vehicles.
Photo of a Tesla supercharger station
Source: Tesla website
The change from Dong’s to Ørsted’s
The transformation of one of Europe’s dirtiest energy companies into the most comprehensive global leader in offshore wind energy is a ready-made Hollywood story of redemption…. and one of the greatest success stories of sustainable investing. Just a few decades ago, Dong’s was one of the EU’s most polluting energy producers. Step by step, however, the Danish company transformed itself into one of the showcase companies for renewable energies, achieving much more than just the name change from Dong’s to Ørsted’s.
Ørsted’s demonstrated that wind power works without public funding and can generate good profits in the long term. With this breakthrough, Ørsted’s has succeeded in establishing renewable energy as a real competitor to fossil fuels. It’s precisely this kind of rethinking that Yova aims to achieve with your impact investment.
Although it’s tempting to ‘cherry-pick’ your favourite companies to invest in, it’s much less risky to invest in diversified portfolios containing at least 30 to 40 different companies. Spreading your financial exposure across different industries, geographies, and other factors will protect your money against unnecessary volatility.
Does sustainable investing yield profits?
Impact investing promotes sustainably operating companies and motivates traditionally operating companies to act sustainably at the same time. But are these investments also worthwhile financially? Does sustainable investing generate profits?
The answer is a resounding yes. Countless studies indicate that sustainable investments are not only on par with conventional assets but even exceed them. For example, two top companies in the financial sector, Morgan Stanley and the Royal Bank of Canada, believe that sustainable investment makes economic sense.
A large-scale study by the renowned Oxford University has shown that sustainable investing is generally more profitable than conservative investments. Impact investment not only creates a better world but is also often more profitable than conventional strategies.
Impact investing in Germany: This is how it works
Before you invest in a better future with impact investing, let us briefly explain how we do it here at Yova. Our offer differs from most other financial products in several distinctive points. One crucial difference is that when you invest with Yova, you invest directly in selected companies, and you actually own their shares. This isn’t usually the case as many providers invest in funds rather than shares. In other words, with Yova, you’re not investing your money in an obscure fund with no way of knowing what your money is financing — you know exactly where your money is going.
Once you have selected your preferred impact themes and exclusion criteria, the Yova Engine puts together a free investment strategy which contains the shares of 30 to 40 different companies while ensuring your portfolio is well diversified and risk-optimised.
You can modify your investment strategy as much as you like until you are 100% satisfied with it. For example, you can make a wishlist or ban individual companies from your portfolio.
Once you’re satisfied with your strategy, you can transfer your money and invest. After that, Yova gives you full flexibility: You can increase or decrease your investment or withdraw your money at any time. On top of that, there are no additional fees or hidden costs at Yova — there is only one all-inclusive fee.
With Yova, ethically sustainable investing is possible in the following companies — here are a few examples:
- Emmi: Between 2014 and 2018, the Swiss dairy products manufacturer not only reduced its CO2 emissions by 18% but also created a platform to distribute food that would otherwise go to waste.
- Daimler AG: Daimler is a German carmaker, best known for the Mercedes brand. Mercedes is one of the leading European car manufacturers when it comes to the development of e-cars. In particular, it tries to find solutions for inner-city traffic, such as e-buses. In addition to this, Mercedes wants to make all of its production facilities climate-neutral by 2022.
- Nordex: The German company Nordex develops, sells and produces wind turbines. The Hamburg-based company is one of the pioneers in this sector. The company supplies more than 18 GW of clean electricity worldwide.
A screenshot of the Yova app showing the company Nordex
How can I start with sustainable investing?
Want to invest in your future with us? Then we have good news for you — sustainable investing with Yova is easy and uncomplicated. Just follow these three simple steps:
- Personalise your impact investing strategy online with the Yova tool; it’s completely free and non-binding.
- Adjust your risk profile as desired. You only invest once you feel comfortable with your strategy.
- Set up a standing order or make an investment to start with impact investing.
Are you a German customer looking to combine financial profits with ethical and sustainable investments? Impact investing is for you — join our waitlist now to take the first step towards a better future.