GLS Bank uses the GLS Bank Climate Fund to support projects to save the rain forests in Peru. Photo: onceawithin Source: iStock

Tackling climate change takes centre stage on the capital markets

Author: Marcel Blumenthal, GLS Bank

A number of fund providers are moving with the times and launching specialised investment products aimed at combatting climate change. GLS Bank decided to set up its own climate fund three years ago. Marcel Blumenthal, Product Manager at GLS Bank, discusses the background and portfolio of the GLS Bank Climate Fund and explains how the fund operates.

Marcel Blumenthal, Product Manager, GLS Bank Photo: Stephan Münnich Source: GLS Bank

With the launch of the fund, GLS Bank underlined its commitment to helping protect the climate.

Marcel Blumenthal

ChampionsNews: Mr Blumenthal, the GLS Bank Climate Fund (ISIN DE000A2DTNA1 AK A) was launched in summer 2017. What are the goals of this ESG fund?

Marcel Blumenthal: In launching this fund, GLS Bank emphasized its commitment to helping protect the climate. We wanted our clients to be able to play an active role in the fight against climate change. In particular with the divestment movement in mind, we aimed to offer state and public investors sound options to reinvest their capital after they had shed their fossil fuel investments.

ChampionsNews: How does the fund actively contribute to efforts to protect the climate?

Blumenthal: We have developed specific climate criteria for the GLS Bank Climate Fund so that we can be sure that we only invest in climate-friendly issuers. We analyse the impact of the products and services on the climate, as well as the business strategy and actual C02 savings. The process is then verified externally by Imug Rating, a German sustainability rating agency. If it is not possible to collect all the necessary data, we enter into an active dialogue with the companies. GLS Bank uses income from the fund to support specific climate mitigation projects, including solar kiosks in Ghana and projects to protect the rain forest in Peru.

ChampionsNews: About 70 percent of the fund comprises bonds, including a number of green bonds. What makes the latter so attractive?

Blumenthal: Green bonds finance eco-friendly activities and projects, including, for example, the construction of energy-efficient housing, wind farms, water treatment plants and much more. This is in line with our investment philosophy. However, not all green bonds are sustainable. We take a sceptical view of energy-efficient projects led by oil production companies or airport operators. This is why we take a really close look at who is issuing the bond and how trustworthy they are. We also check environmental and social standards. What’s good for the climate is not necessarily good for biodiversity or a socially-acceptable energy transition.

ChampionsNews: Your investments in smaller titles such as “Erlebnis-Akademie” are unusual.

Blumenthal: Unusual but crucial: there are a lot of smaller, committed green enterprises with strong social-ecological business models. These companies turn to the stock market to raise capital in order to successively expand their social and ecological businesses. To do this, they need investors with a long view. This is exactly what we want to support.

ChampionsNews: A climate fund needs to prove it is effective. How do you do this?

Blumenthal: First of all - as is standard practice - we measure the carbon footprint of the portfolio annually. Calculating this figure is only an intermediate step, however, as it does not provide any indication of the extent to which these companies comply with the Paris climate accord. The data is retrospective, after all. In order to make a forward-looking statement on a company’s carbon footprint, we use the science-based XDC-Model developed by the Frankfurt group “right. based on science“. The result: if the entire global economy were to operate on the same lines as companies in the GLS Bank Climate Fund, global warming could be reduced to under 2 degrees by 2050.

ChampionsNews: Looking forward, what can we expect from the GLS Bank Climate Fund in 2021?

Blumenthal: Our fund is now almost three-and-a half years old and has a volume of more than 150 million euros. It has performed well since its launch and during the corona pandemic, pays a regular dividend and has both very good sustainability and very favourable fund ratings. Morningstar, amongst others, currently gives the fund a five-star rating. As a defensive mixed fund, we aim in particular to attract the attention of investors with a low-risk profile who want to contribute to the fight against climate change. Given the growing environmental crisis, the GLS Climate Fund is without doubt a sound and attractive investment. 

Author: Marcel Blumenthal, GLS Bank
Date of issue: 4/27/2021