Environmentally Friendly Projects
A new aspect of valuing investments is sustainability. Words such as “ecological”, “social”, “ethical”, green,” or “climate-friendly” are being heard more and more often. However, there are no uniform standards for sustainable investment. But there are various forms of investment that exclude, for example, investments in the climate-harmful flow of coal or child labour. Or funding can be used to target social or environmentally friendly projects, such as the construction of schools or solar parks.
A sustainable economy always refers to the environment and, in part, to the social framework. These are often long-term projects. Sustainable money investments do not automatically guarantee long-term economic success, although they are forward-looking. The risk also depends on the type of investment. Especially the sustainable products of the so-called grey capital market are to be considered.
Shares or Investments?
Other risks include investments that are identified as sustainable but still contain or finance elements that are harmful to the climate or the environment. Wealth management companies provide advice on which projects are sustainable. EU regulations require providers to make sustainability-related information available by March 2021. And it goes in the opposite direction: according to the EU Commission, the investment advisor should ask whether environmental or social aspects are also important for an investor when investing money. The question of sustainability preferences will be part of the consultation. At the same time, we are working on an EU Ecolabel for financial products.
The most popular sustainable investment options and strategies include impact investing, sustainable stocks, and sustainable funds. When it comes to impact investment, the social aspect is at the forefront. Sustainable stocks are invested in the securities of companies that operate ecologically and socially sustainably. Sustainable investment funds are guided by ethical aspects of the company. However, higher fees may be required from sustainable funds for the active management of “green stocks”.
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