Why green funds fell short of expectations

Catching up is difficult

“With such high losses, it becomes difficult for investors to make up for their original investment,” says Bernhard Führerindependent asset manager from Strategy & plan. “With the Erste WWF Stock Environment Fund, for example, a profit of 100 percent would be necessary to compensate for the loss. With the previous average return of three percent per year since inception, this would take around 25 years – without taking inflation, taxes, fees and opportunity costs into account.”

In his view, they are increasing Greenwashing allegations one reason for the poor performance compared to the industry. “Many investors are unsure whether the products advertised as sustainable actually meet their requirements.” It also shows that the strict focus on ESG criteria can sometimes be at the expense of returns. “This is particularly problematic for private investors who are looking for both a sustainable and profitable investment.”

And how do providers react to the poor performance?

“You have to differentiate between broadly diversified ESG equity funds and sustainable theme funds,” says fund manager Alexander Weiß from Erste Asset Management to KURIER. “More likely small capitalized companies from the renewable energy sector, which is primarily included in the Erste WWF Stock Environment, have suffered in recent years from increased interest rates and the associated high financing costs.”

With one like this special thematic funds There have been other times too. From the end of March 2020 to mid-November 2021, the performance was 150 percent. “Our thematically broader, globally investing Erste Responsible Stock Global has shown a positive performance of more than 10 percent per year since the beginning of 2021,” says Weiß.

Longer retention period

Karin Kunrath, Chief Investment Officer at Raiffeisen Capital Management, points out that regional and theme funds in general certain cycles would be subject to. “We therefore recommend a holding period of at least 10 years.” If you look at the price development of the Raiffeisen SmartEnergy ESG equity fund since the fund was launched in April 2020, this shows one thing positive net performance of more than 38 percent. The fund performed better in comparison with corresponding indices because it more diversified be. In addition, the fund is used by many investors for regular fund savings and so the cost averaging effect comes into play: “When prices are low, more fund shares are bought, which can result in a more favorable average purchase price in the long term.”

A bad start time caught the Ethius Global Impact. “The fund’s financial performance has been worse than the overall market in the last three years due to various effects, such as the poor performance of European small and mid caps,” explains fund initiator and Ethius boss Julius van Sambeck. He also points out that the observation period is too short for a final judgment.

Remains a growth theme

“In the long term, the issue of environmental stocks remains a growth issue worldwide, and not just with a view to the USA,” confirms Erste fund manager Weiß. “The KI-Boom in the technology industry that could Demand for electricity “We want to see demand skyrocket rapidly – ​​demand that is to be met primarily from renewable energy sources.” And the industry would now benefit from this falling interest rates benefit.

Kunrath also believes that historically attractive valuation levels of many companies included in the fund as well as an increased focus on small and mid-caps will return in the next one to two years attractive opportunities offer.

Asset manager Führer is not that optimistic. “Investors should choose sustainable funds proceed particularly carefully and don’t just pay attention to the ESG label. One accurate analysis The investment strategy, the companies included and the previous performance is essential.” It is also important the portfolio to diversify widely and not to rely exclusively on a sustainability trend.