Too few people combine sustainability and retirement provision, says Swiss Life boss Jörg Arnold. If financial advisors raise awareness of sustainable investments, they therefore make an important contribution to society. That combines returns and a good conscience.
I recently met 27-year-old Laurin. He is a client of our financial advisory service and when we met he spoke enthusiastically about the fact that he can support sustainability with the help of his pension scheme. Unfortunately, Laurin is an exception. Only rarely do we meet people in our consultations who can imagine a connection between their financial investment and sustainability in general. In general, finances are not a topic that inspires a majority of people as much as Laurin does.
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But we leave potential behind. Because the better the financial knowledge, the greater the willingness to invest in sustainable financial products. So what to do if you don’t have financial knowledge? It is important for politicians and the financial industry to draw the right conclusions and act.
I randomly meet up with our customers at regular intervals, and over the past five years I’ve had around 50 conversations. I usually encounter surprised faces when I address the topic of sustainability in connection with investments. As soon as I then tell my conversation partners something about and explain how investments can be made sustainably, then they are fundamentally open and interested. However, the talks also show that consumers have a broad spectrum of what is meant by sustainable investments and what they should achieve. Some examples from my conversations:
“In my life insurance, the return is the most important thing to me. If sustainable alternatives have the corresponding potential for returns, they would arouse my interest, otherwise not. In private, I make sure to buy regional products. The topic is important to me.” Jan B., 25 years old
“Who can tell me how sustainable the financial product really is, even if it’s there. Sustainability in financial products only increases complexity. If these are sold, that’s marketing.” Laura F., 34 years old
“Sustainability is becoming more and more important for me and my circle of friends. I have sustainable ETFs myself and would be willing to forego returns to a certain extent.” Caroline S., 26 years old
Also read: Swiss Life Germany boss in an interview – money professional Jörg Arnold: “In the case of old-age provision, we have to move away from guarantees towards returns”
Sure, we all have our own idea of sustainable living. When it comes to sustainable financial investments, however, consumers very quickly reach their limits.
Our regular and representative market research shows that only five percent of people spontaneously associate sustainability and retirement provision. And they only decide on sustainable solutions when they are informed about them. Unfortunately, very few have real financial knowledge.
That’s a pity, because the potential would be high: after all, 42 percent of the informed people have a concrete willingness to make an ESG-compliant investment. Half of them would make a sustainable investment if they were actively asked about it, and 65 percent would therefore explicitly like advice on the subject. It is all the more important that they also receive answers during the consultation.
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So sustainability is not a sure-fire success. Only when people are informed by experts about the possibilities and options does real interest in sustainable investments arise and thus a growing willingness to make important investment decisions in social and ecological transformation.
With sustainable investments, customers can provide for themselves, generate returns and make a convenient contribution to sustainability at the same time. Financial advice is therefore an important lever for bringing sustainability into society.
Since August 2nd, 2022, according to the specifications of the IDD (Insurance Distribution Directive), customers must be actively asked about their sustainability preferences during the consultation. That’s a good thing, given the situation outlined above. However, it becomes difficult when customers ask questions that no one can answer consistently – not even our advisors.
For example, it is currently difficult to define what is actually sustainable and what is not. Consider, for example, the controversial issue of nuclear power. Is that sustainable, yes or no? Everyone probably has a personal opinion about that. According to the current European taxonomy, nuclear energy is sustainable. In Germany, the tendency is probably to view them as unsustainable in the long term. It can get even more complicated when you take a closer look at individual business and investment activities and value chains.
However, we need clear standards when defining and interpreting sustainability in order to ensure a uniform understanding – especially in the consultation. It cannot be that we first ask about needs and preferences and then cannot offer anything that meets the need. Not because there is a lack of products, but because we have taken one legislative step before the other. The chances of sustainable investments are too great for us to gamble away. For this reason, politics and the financial industry are equally called upon to put the topic on the agenda and to develop solutions in close cooperation and, above all, promptly.
From my point of view five points would be necessary:
I am convinced that we will succeed in the social and ecological transformation. It’s a strength effort that requires a lot of shoulders. In any case, a solution-oriented and partnership-based approach would be an important step in the right direction, so that in the future more people like Laurin will consciously and self-determinedly make a positive contribution to society with their investments.
