Who are the leading green mutual funds
Sustainable ETFs: The best-in-class approach and high tolerance limits are the weak points
The issuer, i.e. the provider of a sustainable ETF, selects an existing index, for example the German DAX® stock index. From this, the - let's say - most sustainable 25 percent of the companies flow into the new sustainable index. This principle will Best in class (Selection of the best) called.
Through this selection process, companies get into the ETF for a variety of reasons: It can mean that one of these companies produces comparatively less CO2 within the index. However, it does not mean that the selected quarter basically consists of sustainably operating companies, let alone that these companies pursue a resource-saving business model.
In addition, the ETFs differ in how large the best-in-class selection is. With some providers, only the best 25 percent get in, but with others it can be the "best" 50 percent.With such a large selection, green criteria hardly play a role anymoreto get into the index. The composition of the supposedly sustainable ETF is becoming more and more arbitrary.
In addition, some green ETFs cooperate Exclusion criteria. These are intended to ensure that investors' money is not invested in controversial areas such as the arms industry. For the sectors that are actually excluded, however, apply often tolerance limits of up to 30%. If the critical turnover of a company remains below this threshold, it will still end up in the supposedly sustainable ETF.
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