Any investment that seeks to incorporate sustainability elements alongside financial returns.
The basic tenet of sustainability refers to ESG factors (Environmental, Social, and Governance) and has been used as a base for sustainable services, products and other investment activity. In the case of financial products, for example, it must be made clear whether they are pursuing sustainable goals, and – in accordance with MiFID II – investment advisors must ask their customers whether they would like to invest sustainably.
✓An investment product that avoids negative effects on the environment, such as the emission of greenhouse gases, human rights violations, endangering biodiversity, etc.
✓An investment product (fund) that actively exercises its voting rights as shareholders in dialogue with the company and its management in order to influence corporate policy (so-called engagement).
✓An investment product that deliberately does not invest in companies (principle of exclusion) that are active in certain business activities, such as defence technology/weapons manufacturing, coal or tobacco industries.
✓Take a closer look at the product information sheet to determine how “green”; the investment product really is and whether it corresponds to your own ideas of a sustainable investment.
✓Ask your financial advisor to explain the sustainability approach to you in detail and ask them questions to make sure they are knowledgeable on the topic and can provide you with an unbiased advice towards investment options.
✓Before you invest in an equity fund for example, review their prospectus, and the investor information document (KIID) as well as the website of the funds or the fund company regarding the most important points for you, e.g. costs, risk etc.
In general, those who seek sustainable investing gain a more holistic view of the companies they support, which can help mitigate risk and identify opportunities for growth and improvement.
Additionally, the ongoing and constantly increasing environmental actions worldwide regarding our accelerated climate changes, make it apparent that investors want companies to provide more sustainability disclosures that are material to financial performance.
- For further information on terminology, definitions etc. used throughout this guide, please refer to our glossary here.
- Keep in mind that when a company announces a commitment to human rights or clean energy for example, it doesn’t necessarily mean it will follow through and you should use your rights as a shareholder to engage with the company whenever possible. For further stakeholder engagement guidelines please see here.
You can find out what greenwashing means and how to spot it as an individual retail investor as well as the steps you could take to prevent your involvement in such practice in the video below.
Positions published on BETTER FINANCE’s Gateway to Responsible Investing do not necessarily reflect those of BETTER FINANCE, its members, or its partners.