“Investors should
look to the future,
not at past returns”

Journalist: Redaktion ceo | Photographer: Andreas Zimmermann | Magazin: Green opportunity – November 2021

Many banks’ clients would like to invest their assets in a sustainable way. Tillmann Lang, founder and CEO of impact finance start-up Inyova, and Falko Paetzold, a professor at EBS Universität in Germany and Managing Director of the Center for Sustainable Finance and Private Wealth (CSP) at the University of Zurich, are working on ways to make sustainable investment simpler and more effective.

Mr Lang and Mr Paetzold, in recent years we’ve seen a marked increase in people wanting to invest in a way that’s socially and environmentally conscious. Are you surprised by this trend?

Tillmann Lang: We’ve been seeing a fundamental shift towards more sustainable consumption for some time now. This is apparent in what people eat, the clothes they buy, their travel habits and now also in matters of finance. At Inyova, we’ve been delighted to see how much this trend has accelerated over the last two years.

Falko Paetzold: Institutional investors have been familiar with these issues for a while, and they need suitable solutions. More than a thousand pension funds and institutions have now subscribed to the United Nations Principles for Responsible Investment (PRI). So it doesn’t surprise me that basic concerns such as resource scarcity and social issues are now resonating with smaller bank clients.

Where do you see room for improvement? And where is there still potential?

Paetzold: First of all, the intermediaries – banks and their client advisers – are a major barrier. A lot of advisers don’t know how to talk to clients who want these kinds of products, so they simply don’t. So far, no financial institution is leading the way in this area. The second point is about ‘impact’. Applying exclusion criteria, which has been a popular approach, makes little or no impact. People who avoid investing in arms manufacturers, nuclear energy or casinos do nothing to improve things in these industries. Making an impact on equity markets means making active use of your voting rights as an investor or providing capital to young, sustainable firms. That has an impact.

Lang: One unresolved problem is the fact that terms continue to be used in very different ways. What is ‘impact’? What does ‘sustainable’ mean? There are no uniform standards for these terms. Many of the intermediaries that we’ve just been talking about offer ‘sustainable’ products, for instance, but they’re nothing of the sort. I see a lot of potential here. Another point is the availability of data that can be used to assess how sustainably a company operates and how sustainable its business model is. In this respect we’ve come a long way in recent years.

The Center for Sustainable Finance and Private Wealth (CSP) – a spin-off from the Next Gen Impact Investing programme born out of the Initiative for Responsible Investment at Harvard University – is an academic research and teaching institution within the Department for Banking and Finance at the University of Zurich. As such, it brings together academics, wealthy individuals and investment experts. The aim of the CSP is to generate knowledge and mobilise capital in order to implement the United Nations 2030 Agenda for Sustainable Development and limit global warming to 1.5 degrees Celsius.


Will the data situation improve if we have uniform standards?

Paetzold: We’re working on this, although there are still some major gaps here. Our team is working with the Massachusetts Institute of Technology (MIT) on a project aimed at promoting the comparability of methods and measurements. Ultimately it will also be up to regulators to ensure that uniform standards are put in place.

It’s said that younger people are more socially aware than older people in how they invest their money. Is this a generational shift?

Lang: The younger generation is an important part of this trend, but not the only driver. We’ve noticed that younger people’s values are a major factor in how they make decisions. These things are often kept separate by the older generation: finance on the one hand, doing good on the other. They keep them separate by donating to charity, for instance.

Paetzold: Most of the capital is still owned by older people. But this is changing. Huge sums of money are currently being passed down from one generation to the next. Since 2015, we’ve been offering training in sustainable investment for wealthy heirs, and 160 younger members of very affluent families have already taken part. They raise awareness among the people they know, influence older members of the family and are given greater leeway in decision-making. More can be done in this respect in a family foundation than with institutional investors, which operate within a restrictive regulatory regime.

Sustainable investment solutions have been around for a while. Why has it taken until now for them to become mainstream?

Lang: I wouldn’t say they’re actually mainstream. If you look at the distribution of invested wealth or the expertise within companies, we’re only part of the way there. You get the feeling that society has reached a kind of tipping point. We know a lot more about how things are inter­connected today and we feel them in a very personal way. For instance, that our clothes are produced in Bangladesh, the glaciers are melting and skiing at lower altitudes won’t be possible as often.

“Sustainability issues should be incorporated into all training courses for financial analysts and economics students.”

Paetzold: Sustainable investment depends a lot on people’s personal attitudes, and requires individual solutions. Everyone needs to find out for himself what’s sustainable. That’s why we need client advisers who take the subject seriously and are willing and able to discuss it with their clients.

Inyova Impact Investing is a Zurich-­based digital asset management company that offers impact investment solutions for a broad range of investors. This fintech start-up, which was founded in 2017, specialises in sustain­able asset management and creating personalised portfolios based on an individual’s values. The focus is on social and environmental matters, from future mobility to human rights, reducing CO2 emissions and gender equality.


There are often two approaches available to choose from: exclusion criteria or the best-in-class approach. What advantages and disadvantages do these approaches have?

Paetzold: These are just two of many approaches that we now use. Both are based on the principle of exclusion. The first excludes entire industries, while the second filters out firms that do badly in assessments. There are four other approaches that can do more: the evalu­ation of a company’s sustainability perform­ance, the exercise of voting rights, the focus on thematic investment such as water and solar energy, and impact investment. Sustainable investment means filtering out the best solution in this toolkit.

Lang: The disadvantage of this excellent toolkit is that you often have to rely on a good provider because using the toolkit requires a lot of expertise and a good database. The advantage is that it can be used to cover not only environmental risks but also financial risks, which these ultim­ately are. That’s hard work, but it leads to better investment decisions.

It’s still difficult for smaller clients to access compelling solutions. Why?

Paetzold: Advisers still constitute a bottleneck.

Lang: Younger people hardly ever go to a bank. Older people often don’t trust their advisers either because they were poorly served in the past. It shouldn’t be difficult to invest sustainably nowadays. That’s exactly why we set up Inyova, including for ourselves, because we had had the same problems as investors.

Dr Tillmann Lang is the CEO and co-founder of Inyova Impact Investing. Prior to that, he spent six years working as an engagement manager at McKinsey & Company, where he advised leading global organisations on innovation, product development and corporate strategy, and was the CFO of Benefit Impact Investing in Zurich and Singapore. At ETH Zurich, where he obtained his doctorate, he was a founding director of the Sustainability-­in-Business Lab. Tillmann Lang is an economist, mathematician and IT expert. He studied in Zurich, Heidelberg and Santiago de Chile.

What could advisers do better?

Paetzold: They must practice. Banks are still not doing nearly enough in this respect. A study last conducted in 2019 showed that on average, client advisers at major banks received just one to three hours of training on sustainable investment – and that would be only once, and often this is only available to new staff. That’s clearly not enough. We’re trying to fill this gap with our training programmes.

Lang: The issue of sustainability should be incorporated into all financial training as a mandatory component. That applies to both financial analysts as well as economics students. Today, a finance professional who can’t talk about sustainability is like an IT specialist who knows nothing about the internet.

Paetzold: Financial analysts who do a CFA do learn about this now. But you can still get a master’s degree in finance from a university without attending a single lecture on climate change.

What role do indices, rating agencies and independent providers of sustainability ratings play in the selection of investments and providers?

Lang: They’re particularly important where you don’t have your own database to rely on. But even providers that have their own researchers buy in expertise. The indexing and research agencies play a very important role. They make a lot of primary data available to us, such as a company’s CO2 emissions.

Paetzold: One problem is that there are major differences in how this data is collected. This makes them difficult to compare. One interesting aspect is that providers of sustainability ratings are independent of the firms they evaluate. They’re paid by the investors. By contrast, credit-rating agencies receive their fee from the firms that they rate.

Dr Falko Paetzold is assistant professor for Social Finance at the business school of EBS Universität für Wirtschaft und Recht in Germany. He’s also the founder and managing director of the Center for Sustainable Finance and Private Wealth (CSP) at the University of Zurich. Previously, he was a fellow at Harvard University in Cambridge, Massachusetts in the USA, a postdoctoral researcher at the MIT Sloan School of Management, an analyst and M&A consultant at the private Vontobel bank and a partner at investment consultants Contrast Capital. Falko Paetzold is the founder of GreenBuzz, a global network of sustaina­bility companies. He’s a proud father and enjoys playing sport.

Sustainable funds are usually managed actively, which means higher costs. Is the cost argument slowing the boom in sustainable investment with major investors in particular?

Paetzold: Active and passive can be both a blessing and a curse. Ideally in our economic system, capital should be deployed actively, influence should be exerted and voting rights exercised. If all the money is put into passively managed index funds or ETFs and no one exercises their rights, then investors have no influence and this control mechanism ceases to function. On the other hand, these products offer cost advantages that enable a lot of investors to get into the market in the first place.

Lang: Costs are driven down by technology in particular. At Inyova, we’re already selling financial investments with a sustainability impact at the same price as ETFs.

What about the returns? Is sustainable investment attractive?

Lang: The question of whether sustainability means lower returns or brings added value has already been answered. Countless studies have demonstrated that there’s no decline in returns. The opposite hasn’t quite been proven. However, there are plenty of signs that the performance is better. At the end of the day, reliable management of risks and returns is needed for any investment. Ideally, this should be combined with a good sustainability approach.

Paetzold: As an investor, you should look forward, not at past returns. The issues that are important and affect returns lie in the future: the climate crisis, demographic change and new technologies.

“Most of the capital is still owned by older people. But this is changing. Huge sums of money are currently being passed down from one generation to
the next.”

Mr Paetzold, in 2017 you founded the Center for Sustainable Finance and Private Wealth at the University of Zurich. How have the tasks you face evolved since then?

Paetzold: I spent a long time looking for the biggest lever I could find to drive the issue of sustainability forward myself. I first went into banking, then into academic research. In 2015, I co-founded the programme for wealthy private investors at Harvard University, which is currently operated by a team of 20 specialists. We now want to expand that programme with the addition of an offshoot in Singapore, for instance, as well as similar training courses in other Asian countries. We’ve also launched a programme aimed at new tech entrepreneurs. The participants in this include the initial employees of AirBnB, for example, who have now become very wealthy through the IPO. We also try to keep our alumni updated on impact  investing.

Let us look ten years into the future. What role will your institution or your company play then?

Lang: I hope that Inyova will become a major provider of impact investment and that we can help hundreds of thousands of clients enter the market.

Paetzold: I’m not worried. The issue is set to become a major wave, and we’re only at the beginning of exponential growth. At EBS and CSP, we’re right at the forefront. In ten years’ time, a lot more people should benefit from what we’re doing. The next few years will be incredibly important with regard to the climate.

Let’s finish with a personal question: what aspects of your behaviour do you think have the greatest impact on sustainability?

Lang: In my day-to-day life, everything that affects my environmental footprint: avoiding food waste, eating a diet that’s low in meat and travelling less. But I probably have the biggest impact through my job.

Paetzold: The crucial lever is my ‘handprint’, in other words the impact of my work. There are very few people in the world who can actually have an impact. These are the people I try to reach.

Impact investments are investments made with the intention of generating positive, measurable social and environmental impacts alongside a financial return.”

Definition from the Global Impact Investing Network (GIIN)


Tillmann Lang and Falko Paetzold – In the spotlight

What are you particularly proud of?
Lang: Of the long-term thinking that’s made us so successful in building up Inyova thus far. As a start-up, we’re under a lot of pressure to focus on the targets for the next few months above all else. I’m proud that we’ve always made decisions that affect people and issues in the long term.

Paetzold: I’m proud that our work prompts investors to have what are often difficult conversations with their advisers and families and then do what really matters: transforming their portfolios such that voting rights are exercised actively and thus make companies more sustainable.

What do you do to recharge your batteries?
Paetzold: I head into the mountains on my mountain bike with my young family and committed friends.

Lang: I spend time outdoors. Hiking, making fires, camping, mountain biking, going on ski tours together with my family, with good friends or on my own. And by playing my guitar, though not as often as I’d like.

What life advice would you give your children, descendants, grandchildren or godchildren?
Paetzold: Extremely few people are privileged enough to have an opportunity to have a significant impact on the world. Think extremely carefully about that, and do what has the greatest impact. The world needs you!

Lang: To have the courage to find out for themselves who they are, and to be content with it.

What kind of things get you thinking?
Lang: The music of Dendemann, BoySetsFire and Gisbert zu Knyphausen.

Paetzold: The obstinacy and naivety of so many people, even in the face of direct threats and concrete solutions, such as COVID-19 at the moment and sustainability issues in general.