Issues such as ESG, SRI, impact investing and fund boutiques have a long-term character. Against the background of COVID-19, priorities in the current discussion seem to be shifting. Markus Hill spoke on behalf of FONDSBOUTIQUEN.DE with Anton Bonnländer, Advisor for the Bank für Sozialwirtschaft AG, about the current situation and impressions in product development, due diligence, and fundraising in the field of sustainable investments. Topics such as seed money, skin-in-the-game, kite surfing, rock bands, and social distancing complete the current mood.
Hill: The current discussion revolves very much around COVID-19, its effects on the economy and society as well as on the world’s stock markets. No one can today grasp the effects of this pandemic. This implies a very monothematic view of our society and economy and also leads to a noticeable decrease in risk appetite in the investment sector. To what extent is the topic of ESG and impact investment still relevant? Above all, is the attractiveness that has just begun, which has also led to many reorientations among product providers, collapsing again?
Bonnländer: It is interesting to see how the corona pandemic is currently seemingly effortlessly displacing all other problem issues in the public debate. I deliberately say „seemingly“, because the current emergency is sharpening the focus of many people on other trouble spots: underfunding/structural weaknesses in the healthcare system, inadequacies of the digital infrastructure, deficits in the resilience of supply and delivery chains, the need to rethink transport systems and mobility habits, inconsistencies in the social system – to name just a few of the issues. Interestingly, the „shutdown“ in the major economies leads to an improvement in „environmental quality“, to a different view of the „post-pandemic world“. This state of affairs is accompanied by the question „Can’t the financial resources that are now being used for crisis management be linked to a sustainable investment? I think that the view of the one catastrophe also opens up inventiveness and social motivation as to how other problem areas could be dealt with in one go, so to speak. A great deal of capital is being made available here worldwide, capital that was previously not planned by politicians, if at all, for meaningful investments. This is why ESG and impact investing is a highly topical issue. We will be able to deal with the pandemic; it will subside. The serious ecological, social, and economic issues covered by the UN’s 17 SDGs remain active and want to be resolved. The global impact of the pandemic is perhaps also building the necessary bridges to come together more strongly at the international level. So, first of all – capital will flow, and it will flow into new fields of investment with return prospects. Structural crises have always been opportunities. And secondly, concerning the capital markets, for me as an „investment man“, the crisis offers the opportunity to analyze the resilience of sustainable investment solutions to exogenous shocks compared with conventional, purely return-oriented – and often environmentally damaging – investment opportunities. Initial results show me that ESG investments are at least not falling more sharply than the market; many ESG portfolios lost significantly less. As soon as I have sufficiently verified this, I will make my results available.
Hill: As a bank, „ESG boutique“, you offer mainly sustainable mutual funds. At the same time, you develop impact investments for the smaller circle, for professional and semi-professional investors. What experience have you gained in this? What advice and tips can you give during the product conception phase? Which mistakes should be avoided?
Bonnländer: Stimulating question! Here too, Corona shows, as in a magnifying glass, the already existing necessity to tread new paths. We also see ourselves as a kind of ESG boutique; many fund boutiques in the segment will be presenting themselves in Cologne in the fund selection section. Cleaning the door, visiting large potential investors in the start-up phase of a new product idea to collect seed money, are simply not possible at the moment, and are even forbidden. At the Bank for Social Economy, I was also on the side of the „product decision-maker“ for a few years. There you are swamped with requests for appointments, annoying presentations sent and the roles are usually clearly assigned from the outset. These conversations are usually characterized by „sales pressure“ instead of „interest suction“. Rarely did the discussion partners succeed in reversing this. So digital communication is the order of the day at the moment! With it, I can create „suction“. Draw attention to your own house without immediately falling into annoying advertising drumming. Providing information with added value for the information recipient – that builds competence, USPs, and curiosity on the interlocutor. The more complex the products become, the more important the necessary preparatory work becomes. Pre-market sounding should also focus on the situation of a potential investor. What is my potential partner looking for? Which regulatory requirements does he have to comply with? Which investment vehicle is the easiest for him to invest in? How much administrative energy does my product idea cost the investor? How can I facilitate his new product process? What arguments can I provide for the in-house product discussion? Does he need the 17th bond fund investing in the euro area? Even the honest identification of product disadvantages in certain market phases shows transparency and creates trust. Other confidence-building measures include own „skin-in-the-game“ or national or supranational guarantors that reduce the investment risk. Also of interest is information that is not related to the product, which shows commonalities in the company’s philosophy, which underpins special competencies, track records with other products, the identification of positive changes in own processes. Information-on-demand and non-product-related calls-to-action also form proximity and thus the basis for successful personal discussions. At present, these take place more in webinar format or via video conferences. I am curious to see when we will finally be able to hold roundtables, face-to-face meetings, conferences, and customer events again. That’s what I miss most these days! I prefer doing it and having people around me – the more the better. I miss the personal exchange. Especially at events with critical listeners and the subsequent discussions about details, I often took many suggestions with me. That also helps us to sharpen up on certain details when we develop new product ideas.
Hill: What do you personally do „on days like this“ to quote a line from the Tote Hosen? The social distance leads to big changes in the personal environment of many people. What is currently occupying you exquisitely?
Bonnländer: I love kiting and performing in a rock band. Therefore, you are building a nice bridge for me with the Tote Hosen – because unfortunately, at the moment it is really „dead pants“ for these hobbies. If I wanted to go to the Ijsselmeer today – great weather and often good wind conditions – I would probably fail already at the border crossing to the Netherlands. There are no accommodation possibilities near the kite spots there, all restaurants are closed. Here I can feel very clearly how the pandemic suddenly disappears into thin air. With jogging and mountain biking I keep myself in shape at the moment – my „chicken hill“ has unfortunately developed a bit more and the scales at home underline the visual impression in a cruel objective way. Unfortunately, making music together with my band in the Eifel region is also falling flat at the moment. At the Eifel, we have a great rehearsal room and can put our foot down without bothering anyone acoustically.
But it makes no sense – social distancing is simply the order of the day at the moment. So in my spare time, I currently practice at home, at low volume or with headphones. But I’m hopeful that we’ll soon have more free space again. So, stay healthy, there will be better times again!
*) Markus Hill is an independent asset management consultant in Frankfurt am Main. Contact: firstname.lastname@example.org; website: www.markus-hill.com
Link to Bank für Sozialwirtschaft Aktiengesellschaft https://www.sozialbank.de