Joachim Faber on the German Sustainability CodeJoachim Faber, chairman of the Deutsche Börse, spoke to Responsible Investor on the importance of a standardized code for corporate sustainability reporting.
It was a period in which he engineered the takeover of six US asset managers, among them Pimco, that transformed what was just an asset manager for an insurance firm, namely Munich-based Allianz, into an industry giant.
Faber put sustainability front and centre at the Allianz Group. During his tenure, environmental, social and governance (ESG) factors were introduced at all AGI units. Shortly before his retirement at the end of 2011, bond specialist Pimco became a signatory to the UN-backed Principles of Responsible Investment (PRI), following the example of Allianz, which had signed on in the spring of that year.
These days Faber is helping to promote the German Sustainability Code [PDF download - English], a set of guidelines for corporate ESG reporting.
“The Code has been received well by a great portion of German industry because we took care to agree its standards with around 300 industry representatives,” said Faber in an interview in Frankfurt.
He said it naturally would take time for companies to sign up in great numbers but said the Code was clearly preferable to a possible move by the European Commission to require reporting on corporate sustainability.
Faber is also an ardent supporter of the PRI due to its role as the sustainability benchmark for investors. “When I was at AGI, I was always baffled by how European and American investors defined sustainability. They were worlds apart,” he said.
“If you consider that we now have very active Asian and Latin American investors, I think it’s essential that we have a standard like the PRI.”
Faber, moreover, feels that another code, namely one for German corporate governance unveiled in 2002, has vastly improved the way the country’s listed firms are run. “There is no comparison to what went on before. The appointment of executives and board directors is completely transparent, as are their salaries and bonuses,” he said.
Indeed, such transparency led a group of institutional investors represented by Hermes Equity Ownership Services (Hermes EOS) to challenge the €20m in compensation for Volkswagen CEO Martin Winterkorn and the €2.6m paid to Deutsche Bank’s supervisory board during the firms’ annual meetings last spring.
Turning to other issues facing German institutions like pension funds and insurers, Faber said he understood why so few had so far invested in offshore wind power – even though their money is important in meeting the German government’s ambitious target – 10 GW by 2020 – for the renewable source.
“The simple fact is that whether referring to liability in the case of project delays or the lack of power lines between northern and southern Germany, the investment conditions for pension funds and insurers are not favourable. They’re not venture capitalists, but long-term, conservative investors. So they can’t afford to take any unnecessary risks.”
EnBW, the state-owned German energy firm, won’t take those risks either. Recently, it said the lack of clarity on liability issues was a chief reason why it was postponing a €1.5bn investment in a new wind park off Germany’s North Sea coast.
Joachim Faber was CEO of Allianz Global Investors from 2000 to the end of 2011. Since May 2012, he has been chairman of Deutsche Börse, the operator of the Frankfurt bourse. He spoke to RI as a representative of Germany’s Council on Sustainable Development.
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