Asset managers Union Investment, Erste and Acadian have banned investments in German carmakers from some of their funds, after an investigation of alleged industry collusion was announced.
Last month, Brussels said it would investigate suspected cartel behaviour: it is alleged that Volkswagen, Audi, Porsche, BMW and Daimler have been holding secret meetings for decades to collude on technology, components and suppliers.
Carmakers have been in the spotlight since 2015, when US authorities discovered Volkswagen had fitted “defeat” devices to cheat in diesel vehicle emissions tests.
Union Investment, Germany’s third-largest fund manager with more than €300 billion in assets, banned investments in Daimler across its €30 billion sustainable fund range this month because “litigation risks have increased during the last weeks and months”.
Its sustainable funds, which take account of non-financial factors for their investment decisions, are also banned from investing in VW.
Erste and Acadian have also banned all German carmakers across any funds that consider environmental, social and governance concerns in investment decisions.
Asha Mehta, a portfolio manager at Acadian, which oversees assets of $87 billion, said poor practice appeared rife among German carmakers.
“Many German car manufacturers have faced a host of allegations, ranging from customer relations to corruption related issues,” she said.
Other fund managers, including Deutsche Asset Management, Germany's biggest asset manager with €711 billion of funds, and Candriam, a Franco-Belgian firm that manages more than €100 billion, said they were reviewing their investments in carmakers.
Engagement
But Deka, Germany’s fourth-largest asset manager, said it had not stopped its portfolio managers from investing in carmakers. “It is our belief that as an active shareholder, ongoing engagement with companies is a much better way,” it said.
MSCI, Oekom-Research and Sustainalytics, three companies that provide research widely used by investors to understand non-financial risks, downgraded their ratings for German carmakers in the past month, warning investors were at risk of big losses if the cartel claims were proved true.
Howard Sherman, executive director of MSCI, said: "Dieselgate was bad enough; the new cartel allegations, if true, could further damage the reputation of German auto manufacturers and could prove quite costly due to regulatory fines and potential litigation."
Earlier this year, VW paid a $4.3 billion fine for fitting "defeat" devices to reduce diesel emissions in laboratory tests. Other companies, including Fiat Chrysler, have since been accused of similar action. Last year, Daimler was fined for cartel-behaviour in its trucking business.
Enrico Colombo, research analysts at Sustainalytics, said the research company had downgraded German carmakers because there are "significant levels of risks associated" with the allegations.
“The auto industry is under the spotlight at the moment. If [investors] are still invested in these companies, they should be asking questions and making sure the management are taking it seriously and have strategies in place to deal with this issue,” he said. “It is a bumpy road ahead for carmakers.”
Daimler and VW have previously declined to comment on the allegations, while BMW has categorically denied them. – (Copyright The Financial Times Limited 2017)