19.02.2018

Green and fair? How you can invest money sustainably

You can specifically choose to invest your money in a sustainable way. How does it work? It couldn’t be easier: you buy financial assets – such as shares – in companies which adopt a sustainable approach. Or you can invest in funds with a portfolio which includes shares in such companies.

Whether or not a company is sustainable can be determined based on various criteria. Most companies are not equally strong in all areas. For this reason, sustainable investments can prioritize various issues, such as environmental protection or other ecological aspects, social welfare and fair business practices. Investors must first consider which aspects and issues are particularly important to them.

Select sustainable financial investments

There are three methods which can be used to select sustainable investments:

  1. Exclusion:
    Using this method, you rule out from the start any sectors and companies which, in your view, are harmful to the environment and society due to their business activities. This often includes the armaments industry. Sustainable investments also exclude companies involved in nuclear energy or which tolerate inhumane working conditions.

  2. Best-in-class approach:
    This method first evaluates all companies in a sector using the ESG criteria. These sustainability criteria focus on environmental, social and governance factors. You then select the companies that perform best within their sector. You can determine the priorities for yourself – for example, you can select companies that place great emphasis on environmental protection.

  3. Positive impact:
    With this method, you select companies which you believe will have a direct positive impact on the environment or society thanks to their business model. Examples include renewable energies, promotion of integration or microfinance projects in developing countries.

If you buy shares directly, you can decide for yourself which companies and sectors you wish to select, but sustainable funds also adhere to national and international standards when making their selection and must disclose which companies and sectors are included in their portfolios. Funds also make it easy for you to make investments which meet your own requirements while saving you work on time-consuming analysis. The market for sustainable investment is constantly growing, so you are certain to find what you are looking for.

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