The “Climate-friendly investments – An advisory check at Luxembourg banks” report has left the ABBL “cold”, the association said in an interview. The Greenpeace report concludes that Luxembourg banking advisors fail to give sufficient, exact, and clear information on sustainable portfolios to potential investors, while also not providing funds that are aligned with the Paris Act’s climate goals.
For their report, the non-profit had 19 mystery shoppers conduct 27 standardised counselling interviews in six banks in the grand duchy to determine how sustainable their sustainable offers were. The clients visited the ING, the Banque de Luxembourg, BGL BNP Paribas, BIL, Spuerkees and Raiffeisen for their test. The mystery shoppers were selected among the organisation’s various networks, and presented diverse profiles when it came to gender, age, and experience in investing, Greenpeace told Delano.
A question of definition
The first misunderstanding between the NGO and the banks seems to be the definition of what a sustainable fund is. While Greenpeace looked at the impacts of the portfolios presented to its collaborators on the 1.5ºC reduction path included in the Paris Agreement, the banks look at funds differently.
“Products [that meet the Paris Agreement criteria] do not exist,” says Catherine Bourin, member of the ABBL executive committee. “The European regulation (SFDR and Taxonomy) has objectives that are not those of the Paris agreement. They may overlap, but it is not the same approach: Europe aims for ESG products compiling in a global way with different stages of maturity.”
The ABBL worries that Greenpeace’s confused comparison of criteria and their negative evaluation of existing sustainable investment funds in Luxembourg might have an adverse effect on the mentality of clients. For Greenpeace, the fact remains that the funds are advertised as climate-friendly, “when they aren’t respectful of the climate.” And so, “banks are shaking the trust of clients themselves.”
Financing the transition
Sustainable finance is a complex subject, as the ABBL puts it. For Fred Kutten from Spuerkeess, “the benchmark has to be the taxonomy”, a benchmark that has to be set up by the EU for ESG investing. Any efforts to define sustainability by themselves would put banks at risk of hitting against regulatory walls when the benchmarks are established.
In the meantime, clients should be able to invest in funds that are promoting a transition to sustainability. “By having an exclusion policy that is too hard, I think you’ll get an unfair transition. So, it’s more important to work on the transition than excluding at the beginning too many companies. That won’t work,” says Spuerkeess’ head of sustainability Rudi Belli.
Citing the German RWE energy provider, “one of the biggest energy sellers in the world, they are among the leaders of Europe in green energy, but if you followed Greenpeace’s idea of a sustainable portfolio, you couldn’t take them because they also have coal,” explains asset manager Carlo Stronck. Too strict criteria would therefore halt any chance of a transition, he says.
Communication and education key
The ABBL and other banking sector representatives met with Greenpeace Luxembourg prior to the publication of the study--a meeting that resulted in what all actors agree were “constructive dialogues”. Tensions remain, however, some banks, like Spuerkeess, hope to further develop the dialogue with Greenpeace.
Although the study attracted a plethora of criticism from the ABBL, the publication also brought along positive outcomes, like a bigger push for banks to educate their advisors on understanding sustainable investment funds regulations and communicating more effectively with clients. “All stakeholders are aware of the educational efforts that need to be made,” says the ABBL. The BIL confirmed that it would invest “strongly in the training of our advisors and the development of our offer for sustainable investments.” When contacted, the other banks confirmed this intention.
The education of clients on sustainable funds will also have to be pushed.