December 20, 2019

Keynote oikos conference HSG ‘19 on ecological and socially responsible investing

Obermatt CEO Dr. Hermann J. Stern speaks at the Oikos Conference 2019, University of St. Gallen, on personal finance and sustainability. Oikos is a student organization founded in 1987 on the subject of ecological management. Today it is represented at over fifty universities and reaches around 50,000 students with its concerns.

In an hour and a half on 27 November 2019, Stern demonstrated in Makerspace at the HSG that neither return disadvantages nor advantages can be expected from so-called ESG investments. ESG investments are investments that distinguish themselves with regard to ecological (E for "ecology"), social (S for "social") and governance (G) concerns. Another term for this is SRI which means Socially Responsible Investing.

If ESG criteria were to yield abnormal returns, professional investors would have exhausted them long ago. The stock prices adjustments from these professional activities mean that the return expectations for the future can neither be higher nor lower than for other investments on the stock market. This is referred to as arbitrage. This ensures that the risk/return profiles of the investment alternatives are similar.

You can therefore invest safely in such ESG or SRI investments and will not be worse or better off in retirement.

However, the identification of SRI / ESG investments is a practically impossible task because there is no agreement on the criteria and their weighting. It always remains a personal decision as to what are good ecological and social activities for the investor. Stern demonstrates this impressively by asking listeners to weight ESG criteria and comparing this weighting with the "official" weights of ESG rating agencies. Not only is the audience largely at odds with each other, in addition their opinions are diametrically opposed to the weights of the major rating agencies in half of the cases shown.

Stern then leads the audience through a series of exercises and thought experiments that suggest that independent and direct investment in shares not only increases personal retirement capital, but also permits better recognition of ecological and social criteria.

The most important point of this keynote is the participants' experience of how investing personally and directly in real companies on the stock exchange is not only exciting, but can even be fun.

Recorded by Obermatt with kind permission of oikos St. Gallen, November 2019.

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