The topics of SRI, ESG, and impact investing are being intensively pursued by family offices and foundations. Institutional investors such as insurance companies, pension funds, and pension schemes have been dealing with investment concepts and regulatory issues in this area for years. Markus Hill spoke for FONDSBOUTIQUEN.DE with Anton Bonnländer, Head of Investment Management at Bank für Sozialwirtschaft AG (BFS), about the current challenges for impact investors, sustainability in product design and product selection for own investments.
Hill: What exactly does the Bank for Social Economy do?
Bonnländer: We focus entirely on business with companies, associations, foundations, and other organisations that are active in the social sector (senior citizens, disabled persons, children, and youth welfare), health, and education. Our focus is on non-profit institutions and foundations. Here, the focus is not on maximising profits, but on ensuring the provision of services. The Bank for Social Economy (BFS) offers the banking services that make up a specialized universal bank, i.e. financing, investments, and special payment transaction services – such as fundraising for our clients in the social sector. We see ourselves as a kind of family office for the social and healthcare sector. Sector knowledge and networking are what make BFS what it is – we offer business management consulting as well as social market analyses, location and potential analyses in which we make the opportunities and risks of investments transparent. The BFS has an office in Brussels, to take up the coming impulses from Europe early on or to make use of special EU funding packages. In the financing and investment sector, this thinking outside the box is highly appreciated by our clients. The core task of the FSO is to make money from the social economy available for the social economy. Also, the bank itself has investment needs in the investment sector and also offers special solutions for institutional investors. As a “Trusted Advisor,” we are very aware of our responsibility in the development or selection of products and the assessment of the associated risks.
Hill: What are the special features of your business model?
Bonnländer: Everyone is talking about sustainability today. SRI, ESG, and topics such as impact investing have accompanied the Bank since its foundation by the charities in 1923, although these terms did not exist at that time. If you like, we are one of the classic pioneers in this field in Germany. BFS is very specifically positioned within the industry, if only because of its funding structure. This can also be seen in our customer groups. These include outpatient and inpatient care facilities, hospitals and special clinics, medical care centers, health insurance companies, social insurance carriers, workshops, and residential homes for people with disabilities, residential and daycare facilities for children and young people, independent schools, and other educational institutions. The Bank is deeply rooted in the “ecosystem” of its customers. We live sustainability, especially with a focus on S (Social) and G (Governance), whereby the ecological side of ESG is always part of our daily business. In financing projects, for example, the ecologically efficient planning and equipping of buildings and operations are taken into account (energy use and consumption, careful use of resources in architecture and operational processes, waste avoidance, digitalisation, etc.).
Hill: What topics are you dealing with in the investment area?
Bonnländer: Our investment clients are risk-averse and distribution-oriented. That is a very relevant point. In its product ideas and due diligence, BFS combines value quality with stable distributions. I know both sides very well in my function as the person responsible for the selection of my investments and product concepts. Foundations need cash flows to fulfil their purpose. Non-profit organizations can achieve all the more, the better continuous income flows. An absolute no-go is investment opportunities that simply contradict ethical and ecological principles. Furthermore, investment management is intensively engaged in the synthesis of economic and social-ethical sustainability in investment solutions. In the meantime, the term sustainability has also reached the mainstream, and the ecological dimension of sustainability, in particular, is being intensively discussed. We see it as our mission to make meaningful investment solutions available and to close gaps. For example, BFS was the first credit institution to launch a mezzanine fund for the social sector. The product design was rather secondary, the effect, the impact was important to us: the supply of capital to non-profit enterprises via this vehicle. Every euro you consume or invest has an impact. We want to create a positive impact. This is the focus of our investment management. The idea of sustainability is in the foreground. We are also familiar with this concept from our personal experience. I enjoy water sports, travel a lot in nature, and have my thoughts, also about sustainable tourism. While kiting I feel the environmental changes on my own body, especially the shifts in the wind maps. Nature is already giving us signs: since 2018, everyone has suddenly experienced what happens when inland waterways suddenly stop operating completely due to record-low water levels, when food in the fields withers. What will the world look like when these phenomena become permanent? Impact Investing is not do-gooders, it is the order of the day. We are not alone in this, but few other credible financial institutions besides ourselves implement this consistently in their advice. And with commitment and authenticity!
Hill: Which topics are you currently dealing with more intensively?
Bonnländer: So far, the bank has launched sustainable retail funds for its institutional clients. In the future, BFS would like to bring these public funds into the focus of private investors. Private investors cannot become our customers, but they can acquire the bank’s investment philosophy through our public funds. Our goal is to make capital from the whole of society more available for the social economy. In the area of product design for institutional investors, we are currently working on the topic of private debt. A credit fund is a tool for reconciling the interests of investors and capital seekers. In its credit fund, BFS convincingly combines know-how, network, and reputation. Negative interest rates and low bond yields are currently driving investors away. If you combine stable, alternative – ideally even non-cyclical – sources of return with a growth market, you meet an important “investment nerve” of institutional investors. In general, too much emphasis is placed on short-term economic returns rather than long-term socio-ethical returns. By this I mean: What causes financial crises, social crises, and ecological imbalances? We always work at the expense of the weakest links in a system until the system finally shows us the red card. If the real costs of environmentally damaging behaviour were immediately felt and had to be paid for, the follow-up costs would be looked at in a completely different light. Social unrest, “system collapse” and flight movements due to failed education, development, integration, health, and social policies are already being paid for by us all, more unconsciously than consciously. If we were more aware of all the financial factors, many product suppliers, service providers, and investors would already be thinking, acting, and managing in a much more impact-oriented way. In the future, the money will be made by conscious investment! As you can see from my remarks, we are putting our heart and soul into this and are not necessarily wearing the “classic” banker’s glasses. We want to get to know interesting partners in the market, form coalitions for “good”, so to speak, and have a positive impact on society.
Hill: Thank you for the interview.
Anton Bonnländer is head of the investment management division of Bank für Sozialwirtschaft AG (BFS) and is responsible for the customer securities business as well as BFS’ investments. He is 55 years old and the father of two daughters. He is a volunteer member of the advisory board of the Hilde Ulrich Foundation in Frankfurt am Main.