Union Investment Board Exec urges German investors to sign PRI ahead of mooted EU rules challenge

Alexander Schindler, board executive at Frankfurt-based asset manager Union Investment – one of Germany’s biggest fund managers – has urged German institutions to adopt the UN-backed Principles for Responsible Investment (PRI) ahead of what he believes could be regulatory sustainability demands implemented in the coming years by the European Union (EU). Union Investment is already a PRI signatory, one of 14 managers with German businesses that have signed the initiative. “The PRI is the best standard out there. It might not be perfect, and perhaps it has attracted some who are not serious about responsible investing. But we in Germany have to be pragmatic instead of waiting for a standard that provides a sustainability guarantee of 120%,” said Schindler, who was recently interviewed by RI at Union’s offices in Frankfurt: Read Part 1 of the interview
According to Schindler, who heads Union’s institutional business, the PRI is an effective way of fulfilling what he believes will be future sustainable requirements on investors from the EU. “I’m convinced that in the aftermath of the financial crisis, either the (European) Commission or the Parliament will demand sustainable investment. Brussels is fed up with the way several banks used to behave and with short-termism generally,” he said. The EU has been discussing proposals with regards to the sustainable labelling of financial products. So far, nine German institutional investors and 13 asset managers including Union have adopted the PRI. Given that there are hundreds of German institutions, whether pension funds, insurers, banks or ecumenical organisations, the UN PRI’s potential on the investor side is huge. The German environment ministry, an ardent supporter of the PRI, recently commissioned PriceWaterhouseCoopers to develop a handbook for German investors interested in the PRI:
Link to article observers say significant barriers stand in the way of more German investor involvement with the PRI. One is its lengthy reporting requirements in English. Another is doubt among several ecumenical organisations about the PRI’s usefulness. Some faith investors take a more dogmatic approach to responsible investing than the PRI’s ESG integration recommendations. Solvency II, the new regulatory regime for European insurers, is another barrier to sustainable/green strategies in German institutional investment. It treats investments in renewable energies like those in equities, and subjects insurers to a capital requirement equalling 49% of the investments’ value. Schindler hopes, however, that as the German government needs insurers and other investors like pension funds to help finance its ambitious renewables strategy – the Energiewende – the requirement, will be eased. Union recently become the first asset manager in Germany to sell a dedicated institutional renewables fund, which will invest 70% of its assets in onshore wind power. Schindler said the focus on onshore instead of offshore was because the latter technology was still untested. Dutch grid operator TenneT has had huge difficulty in connecting offshore wind parks to Germany’s grid. Echoing remarks made recently by German life insurer WürttLeben, Schindler added: “On the other hand, we believe in the long-term promise of offshore parks for investors, simply because, unlike onshore parks, there is never a shortage of wind.” Union Investment runs €101bn in assets for institutional investors. Around 60% of the volume comes from German co-operative banks, which own Union, and the rest from other institutions like pension funds and insurers. The asset manager’s business with non-cooperative banks has grown further. Since the start of 2012, 12 of its 15 investment mandate wins have come from outside the sector.