Published in: Institutional Money

– In consideration of high inflation rates and a threatening recession, major risks have built up on the financial markets. Many investors are therefore looking for some sense of security – and they are finding it in gold. The decision to invest in ESG gold also offers the opportunity to contribute to sustainability. “Investors in such projects can do so by means of securitisations, which Fair Alpha issues and administers at their request”, says Daniel Knoblach, Board Member at Fair Alpha.

Investors are facing difficult times: As inflation rates have climbed to record levels worldwide, they placed a heavy strain on consumption and investment alike. Central banks in turn are raising interest rates to restore monetary stability. As a result, major economies are forecast to contract in the coming year. Rising interest rates and falling corporate profits are increasing risks in the equity and bond markets. 2022 alone has demonstrated that even supposedly safe government securities may be suffering high losses.

“It is in this situation that investors are looking for safe havens such as precious metals”, says Knoblach. In principle, the supply of physical gold is limited. At the same time, demand continues to be persistently high – in addition to the jewellery industry, central banks have recently emerged as buyers as well. Big players are the Chinese, Indian and Saudi Arabian currency regulators, which intend to reduce their dependence on the US dollar. Rising US interest rates have recently weighed on the gold price, but they are likely to be largely priced in by now.

Gold mining is, however, frequently considered an ecological burden. “Environmentally conscious investors will be able to focus specifically on sustainable gold”, Knoblach explains. This is precious metal obtained from melting down old jewellery or from damaged gold bars and coins. In addition to this type of recycled gold, there is responsible gold whose mining processes are strictly monitored in accordance with ecological and social aspects.

“One option to invest in sustainable or ESG gold is by way of Luxembourg securitisations, which are structured and designed according to an individual investor’s needs”, Knoblach says. In this scenario, different assets are bundled and issued as individually structured securities. “We are turning investors’ ideas and trading strategies into investable and custodial securities”, Knoblach points out. “With the help of customised issuing vehicles, we are securitising securities without issuer risk.” Sustainable securitisations are also increasingly used to serve the rapidly growing interest in sustainable investments. “These are subject to our Green Finance Framework, which has been reviewed by a best-in-class second party opinion (SPO) provider”, Knoblach concludes.