Low carbon investing in Germany
Ethical Consumer co-editor Rob Harrison reports from Berlin.
On 27th February, Rob spoke at a conference on the subject:
"Between legitimacy and acceptance: How can standards for ethical / ecological investments be established?"
In Germany, some groups are exploring the idea that giving consumers good quality information on the ethics of their investments might help the government meet its carbon reduction targets.
If (as the opinion polls show) around 50% of German investors are interested in ethical investment generally, then helping them find better performing investments from a carbon reduction point of view might have generally wider societal benefits.
A conference in Berlin to discuss these issues had three main themes:
- how can you measure the carbon footprint of (ethical) investment funds?
- how can you communicate this to consumers
- how can you best protect small investors in local renewable energy schemes?
Measuring a fund's carbon footprint
In theory, if you were to look at all the shares in a fund portfolio, and you had some idea of each company's carbon impacts, you could calculate a comparable carbon footprint for different funds.
In 2014, the German consumer group Verbraucherzentrale Bremen secured some significant German government funding to explore this idea and contracted the specialist Swiss carbon research group South Pole Carbon.
The main problem they came across was that, despite the great work of the Carbon Disclosure Project, very few companies will disclose all their carbon emissions.
The example they used was the car company VW, which gives great data on manufacturing emissions, but these pale into insignificance when compared to the CO2 each of their cars will emit in a lifetime of consumer use (which are not disclosed).
However South Pole Carbon were able to perform some calculations on 'cradle to grave' carbon emissions across nine 'ethical funds' and the outcome of their research (a carbon footprint ranking available only in German) was published at the conference.
A Triodos fund – also available in the UK – did well in the ranking. This approach may spur us in the UK to look at something similar I wonder?
Investing in local renewable schemes
Last year, a high-profile German renewable energy company (Prokon), which raised funds from small investors using big national adverts, went bust.
A campaign group 'Friends of Prokon' trying to convert it into a co-operative by securing further investment from 'members' has also not apparently been successful.
With a lot of people losing money, attention in Germany has now focussed on the riskiness of these schemes.
At the same time as some of us in the UK are campaigning against new restrictions on community energy schemes, we are all facing the need for a careful balance between an urgent need for energy transformation and the protection of small investors.
Smartest guys in the room
Overall I was struck by the sheer brain power of all those assembled at this conference.
I was reminded of a book and film from 2005 about Enron called “The Smartest Guys in the Room.” The story it told was how brilliant financial minds and creative accountants had simply run rings round everyone else (to achieve a spectacular fraud).
Today I got the sense that climate change campaigning was beginning to prise away some of these brilliant minds from the discredited world of finance and onto something much more useful instead.
Some cautious optimism might be appropriate.
More details on the conference are available here (in German).