Back Publications Published on 5 November 2021

The financial model of DAX 30 companies in the light of the ecological and social transition

Our study analyzes how DAX 30 companies have used their profits in the past few years: between 2009 and 2020, payments to shareholders rose by 85%, almost twice as much as profits (after tax) which rose by 48%, while the proportion of income taxes that the DAX 30 paid in the same period rose by only 42%.  Some companies even sometimes transferred money to their shareholders in years of loss. In addition, the cumulated financial reserves of the DAX 30 grew from 122 billion euros in 2014 to almost 200 billion at the end of 2020, which also benefits shareholders as larger reserves increase the company’s value.

Beyond, our analysis shows a trend reversal. The DAX 30 companies seem to be moving away from the historical corporate and financial management approach in which the shareholders are the last to participate in the company’s value creation, depending on the level of profits. While traditionally, dividends were only paid when all other key spendings had been made, the DAX30 now constantly increase payments to shareholders, while the allocation of profits to investment capacity has become an adjustment variable.

At the same time, investments of DAX 30 companies in the fight against climate change is not up to the challenges. Our estimates of the annual investments required in order to make the business models of these companies climate-neutral by 2050 show that they invest too little whether in the transport, energy, real estate or cement sectors. Yet, given their financial leeway, some companies would be able to do so without government subsidies or tax breaks. For example in the transport sector, if BMW, Daimler, Volkswagen and Lufthansa were to make the additional climate investments required of 13.8 billion euros per year, they would still make profits that would allow them to pay dividends as high as in 2009 or 2010.

We also investigated the issue of human rights and due diligence. In the case of Adidas, if the company was to  ensure the payment of living wages in the factories of most of its suppliers, it would require additional expenses of around 567 million euros. This amount would halve Adidas’ annual profits of 1.22 billion euros and potentially reduce the payments to shareholders by the same proportion; even in this case, dividends would remain at the level as in 2013, when they were among the highest in the world’s textile industry.

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