Investment Risks

Funds shed auto stocks

main 58025769 Reuters – red traffic light VW headquarters Wolfsburg 2015
For some fund managers, the cartel allegations are a red sign. Source: Reuters

A perfect storm may be in the making for Germany’s carmakers. Last month, allegations emerged Mercedes-maker Daimler, BMW, VW and its subsidiaries Audi and Porsch may have colluded since the 1990s on everything from emissions to which suppliers they used.

The European Commission is investigating the issue, which follows on the heels of possible driving bans for diesel cars and Dieselgate investigations, which spread from VW to Daimler and car parts maker Bosch. Diesel bans have scared European consumers, who are turning their backs on diesel cars and choosing gasoline-powered or electric vehicles instead.

Although BMW has rejected the antitrust charges, it has led some asset managers who follow strict social responsible investment guidelines to scrap BMW or Daimler shares from their list of potential stocks to buy. So-called SRI criteria, which can differ from firm to firm, take into account social, environmental or ethical issues, in addition to purely financial considerations. A mutual fund might, for instance, ban bomb makers or companies which use child labor, from its portfolio. Sometimes, the term sustainability or ESG – environmental, social and governance – is also used to describe this type of investing.

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