This is our response to the naming requirements of the European Securities and Markets Authority (ESMA), which will also apply to existing funds from May 21, 2025. Accordingly, funds may only use sustainability-related terms in their names under the conditions specified by the authority. Due to this regulatory environment, we have decided to change the names of the funds, but not their sustainable investment strategy.

Does this mean that EB-SIM and mutual funds are no longer sustainable?

No. We have been pursuing a consistently ethical and sustainable investment process for over 35 years. For example, all of our funds continue to apply the tried-and-tested values-integration-impact concept (WIW concept) is still used in all our funds. Our investors can continue to rely on this proven approach.

What criticisms we have of ESMA’s new name regulation

Lack of a practicable definition of sustainable investments for alternative asset classes

Our focus is on the multi-asset segment. Here we want to diversify as broadly as possible in order to manage the investment risk. Unfortunately, there is no practicable definition of sustainable investments for many alternative asset classes (such as renewable energies, commodities, CO2 certificates) in which our innovative multi-asset products invest (in accordance with Art. 2.17 SFDR). If we wanted to continue to use sustainability-related terms in our fund names, we would have to meet the minimum quota of sustainable investments only by investing in equities and bonds. This would narrow the available investment universe and lead to cluster risks. In addition, reallocations would have burdened our investors with unnecessary transaction costs without objectively improving the sustainability of their investment product.

No uniform definition of sustainable investments for equities and bonds

There is still no uniform standard for the definition of sustainable investments (pursuant to Art. 2.17 SFDR), which means that the quotas applied by different providers are not comparable with each other. Depending on the definition used for sustainable investments (in accordance with Art. 2.17 SFDR), the quotas for the same portfolios can vary greatly, which thwarts the goal of greater clarity for investors and creates increased regulatory uncertainty for product providers.

Lack of clarity in the requirements for different sustainability-related terms (“ESG” vs. “Sustainable”)

Funds with “Sustainable” in their name are treated differently to funds with “ESG” in their name. The requirements for “ESG” funds are significantly more relaxed than for “sustainable” funds. As this distinction is not comprehensible for investors, the aim of greater clarity for investors is thwarted, at least in part.

How do we ensure that we still only invest in sustainable issuers?

EB-SIM has had a sustainability-oriented investment process in place for many years. This is based on values based on the EKD guidelines. Since the beginning of the year, we have also been using our new EB-ESG-Score, which we developed ourselves. The tool, which is based on artificial intelligence, enables the forward-looking management of ESG risks. The score provides a more comprehensive assessment of financial risks, which also leads to better risk management at portfolio level. In addition, we focus on engagement with companies to encourage them to improve their ESG practices through targeted company dialogs and the exercise of voting rights. The basis for this includes position papers on topics such as deforestation, water and living wages.

Has this changed our fundamental attitude towards the EU’s regulatory efforts?

No. The EU’s regulatory efforts are aimed at creating uniform standards in the industry and preventing greenwashing. We therefore continue to welcome them in principle and actively advocate clear rules and transparency. Together with other investors, we recently spoke out against the EU omnibus procedure in a joint declaration by the Institutional Investors Group on Climate Change(IIGCC), the European Sustainable Investment Forum(Eurosif) and the Principles for Responsible Investment(PRI). Nevertheless, some points of criticism remain.

The new names of the EB-SIM mutual funds

Legal information:
This is a marketing communication and is directed exclusively at persons who are resident or ordinarily resident in Germany. The content is neither investment advice/recommendation nor an offer or advice to buy/sell the relevant fund. Likewise, the information does not constitute an investment strategy recommendation within the meaning of Section 85 WpHG. Information including notes on opportunities and risks as well as sustainability-related features can be found in the sales documents of the relevant funds at www.eb-sim.de.