Investing money with a clear conscience
More and more investors not only want to generate returns with their money – they also want to do good at the same time. But is that even possible? 4 important facts about sustainable investments.
Fact 1: Interest in sustainable investments is exploding.
The idea of sustainable business has already caught on with many people – paying attention to ethical, social and ecological aspects is becoming increasingly important. Thinking about tomorrow today, shaping the future actively and responsibly: These goals are simply important to many people – also when it comes to their financial investments.
Fact 2: ESG criteria play a major role in sustainability.
What does sustainability mean anyway? And who decides what is sustainable – and what is not? Difficult questions that have not (yet) been conclusively clarified. Basically, however, experts agree: Sustainable products are first and foremost products that are not only tailored to the needs of the present – but also take into account the needs of future generations. As a result of climate change, the ecological aspect in particular is currently coming into focus. The most important points: Conserve resources and reduce greenhouse gases.
How sustainable funds are selected
When selecting sustainable funds, fund managers take into account so-called ESG criteria. ESG stands for Environment, Social and Governance. This means:
- Environment: A company’s energy and water consumption, pollution or waste production, for example, are evaluated.
- Social: This criterion assesses compliance with human rights or working conditions, as well as innovative strength and supply chain management.
- Government: The activities of the management and supervisory board and dealings with shareholders are put to the test.
There is no standard definition of what constitutes a sustainable investment. It is therefore important to find out whether the fund reflects your own priorities in terms of sustainability.
Some funds exclude companies in certain industries – such as weapons of war, alcohol and tobacco, pornography or gambling. Other funds focus on the companies that are most sustainable in an industry – without excluding individual industries. This is the so-called “best-in-class approach.” And still other funds select according to positive criteria – so the money flows into renewable energies, for example.
Fact 3: Sustainable companies are successful.
Companies that focus on long-term, sustainable goals have numerous advantages:
- Economic advantages: Environmentally friendly and efficient use of resources saves costs.
- Satisfied and committed employees: A sustainable business strategy ensures a high level of identification and long-term loyalty.
- Good market prospects: Companies that recognize the dangers of climate change and address the challenges early on will benefit from long-term structural growth in the future.
- Particular innovative capability: Research into and development of environmentally friendly products ensures that innovation potential increases.
Fact 4: Sustainability can help reduce risks.
Compared to conventional investments, sustainable investments generally do not perform worse. According to experts, sustainable investments are even somewhat less risky than conventional investments. The reason: companies that pay attention to sustainability often also act with more foresight in general.
So investors who pay attention to sustainability at companies do so in order to avoid risks and achieve higher returns. However, as with other investments, there are no guarantees. For this reason, you should always consider the risks associated with investment funds. After all, currency and value fluctuations caused by the capital market can have a negative impact on the investment.