Frankfurt-based SDG INVESTMENTS specialises in sustainable investments and has developed the "SDG pro" investment platform for this purpose, which enables a digitalised issuing and investment process for green bonds. The platform is aimed in particular at medium-sized companies that want to finance themselves with a bond and at professional investors who want to invest in socially responsible and environmentally friendly bonds. The co-developer of "SDG pro", Lars Hunsche, explains in an interview with Anleihen Finder how this special offer is accepted and what special approach the investment portal takes.

Anleihen Finder: Dear Mr Hunsche, could you briefly introduce SDG INVESTMENTS  to us and our readers who may not yet know you?

Lars Hunsche: SDG INVESTMENTS was founded in 2017 by Frank Ackermann and myself.  In September 2019, Dr Stefan Bund joined as a partner. The idea was to create a platform for sustainable investments. We had observed that institutional investors and projects often do not find each other. While the first projects were still very small, in some cases we started with EUR 2 million, we are now also looking at larger tickets up to the triple-digit million range. Since our founding, we have been able to place around EUR 400 million for institutional investors.

Anleihen Finder: With the SDG pro platform, as the name suggests, you offer a special approach for investors. Who are you specifically addressing with your platform and what range of investment cases and financing instruments can be found there?

Lars Hunsche: Many sustainable bonds have a smaller investment volume of EUR 10 - 50 million. In addition, there is often a lack of liquidity on the bond markets. These factors still discourage many institutional investors. In the past, we have often been asked whether we can also re-place positions. We have observed that there is definitely a great demand for trading. At all market phases, there are investors who prefer to reduce bonds and others who still want to expand their investment. This can be due to regulatory reasons, or in investment funds investment limits are violated by reallocations and positions have to be reduced. With the help of SDG pro, we want to stimulate the secondary market for sustainable bonds. By digitalising the process, it becomes much more efficient for all market participants. It is free for investors to register on the platform. There they can signal their interest in buying or selling. Currently, there are around 300 green bonds with a total volume of 146 billion euros on the platform.

Anleihen Finder: What is the special approach of your platform? How does it compare to other investment portals?

Lars Hunsche: SDG pro is a digital order book for sustainable bonds. Here, investors are able to interact directly with the issuers and the SDG brokers. Investments can be made in an efficient dialogue via the SDG pro platform. In addition to investment opportunities in new bonds, SDG pro gives investors access to the secondary market . Here, existing positions can be sold or available and already issued bonds can be purchased. For this purpose, we have expanded our service to include a brokerage service specialised in sustainable bonds.

Anleihen Finder: How many "closed" and "open" investment opportunities are there at SDG pro? How can interested investors invest and what information do you provide?

Lars Hunsche: We are just getting started with SDG pro. One challenge was to deposit the master data for all green bonds on the platform. Furthermore, we realised that we needed a specialised broker for this business. With Martin Kretschmer, who joined us in mid-June as Head of Fixed Income, we gained an expert with comprehensive international experience in the brokerage business. At the moment we are also placing several primary bonds.

Anleihen Finder: What criteria must be fulfilled for investments to be listed on your platform?

Lars Hunsche: On the SDG pro platform, we list bonds that have been certified as either green, sustainable or socially responsible by a second party opinion in accordance with the ICMA standard. We also list bonds for which the sustainability agency imug provided a dedicated sustainability analysis. The project must support at least one of the 17 UN Goals without violating any of the others.  In addition to the second party opinion, we also provide information such as the issue prospectus and the credit rating.

Anleihen Finder: How can you control/detect or prevent cases of greenwashing?

Lars Hunsche: Imug has many years of experience and can distinguish very well between real sustainability and greenwashing.

Anleihen Finder: How far do you support the companies listed on your portal with financing? Do you provide other services to the listing on the platform?

Lars Hunsche: We usually accompany the companies for which we have arranged and placed financing for several years. We are not a pure placement agent who only turns to other projects after the placement. Companies often have follow-up financing needs, which we also want to cover. But we also organise stock exchange listings and support companies in building up investor relations.

Anleihen Finder: Let's take a closer look at the bonds you offer on your platform. Can you give us some examples of current and past bond offerings and perhaps briefly outline why you chose these bonds?

Lars Hunsche:  A successful example from the past is the bond to finance solar power plants in Mali, issued by Africa Greentec Asset.

This project had a very high impact from the beginning and brings electricity to very poor but not destitute people. This enables these people to build livelihoods. As soon as electricity is available in a village, there is immediate economic activity. These are not big companies, of course, but small businesses like welding shops, hairdressers, or internet cafés. Also, access to the internet and lighting means education for many people, especially children. At the moment we are financing a large PV plant in Texas. The total volume is more than 500 million USD and therefore certainly interesting for our largest institutional investors. Worldwide, renewable energies are being expanded more and more, and in a state as large as Texas, which is spoiled by the sun, a PV plant makes a lot of sense.

Anleihen Finder: However, with Dt. Lichtmiete and Hylea you ultimately also had two "problem cases" on the platform? How do you deal with these cases and how do you counteract this in the future?

Lars Hunsche: I personally accompanied both cases intensively during restructuring talks. First of all, it is very important to analyse what led to the failure. In the case of Hylea, it was the general strike in Bolivia, Corona, but also management mistakes. We did not structure this bond, we only placed it. An additional control of the use of funds would certainly have been very helpful here.

The case of Deutsche Lichtmiete is rather tragic. To date, neither the guilt nor innocence of the persons involved has been proven. A central question is the number of luminaires. This problem could have been solved by directly assigning payments from the rental contracts with industrial customers. In the future, we attach great importance to financing as close to the assets as possible. Trustees must also have a certain size and professionalism. Annual financial statements must always be consolidated and audited.

Anleihen Finder: How do you generally assess the financing options for young SMEs at the moment - would it be better for companies to wait for a friendlier and less volatile market environment? Or should the trend towards sustainable investments be used even more?

Lars Hunsche: Sustainability will become a matter of course. Companies will no longer be able to afford not to pay their employees fairly or to pollute the environment. There is still a lot of money in the market at the moment, but the increased interest rates in the US and the increase in interest rates expected here will make financing much more expensive for companies. Not all companies will be able to pass on these financing costs to their customers through prices.

Anleihen Finder: What goals are you pursuing with SDG pro in the future? What further (digitalisation) steps are planned in the foreseeable future?

Lars Hunsche: We want to sell at least EUR 100 million via the platform this year. We expect strong growth in the coming years. We are also intensively looking at the fund world. There, investors often have too much choice from over 10,000 investment funds. So far, funds can only be assessed according to classic criteria such as return, risk or on the basis of a fund rating. It would be interesting to select funds according to their impact on the UN's Sustainable Development Goals. Here, too, digitalisation can bring about a considerable increase in investment efficiency.

Source: Anleihen Finder / Picture: pixabay.com (Symbolbild)