Those that consider sustainability to be important probably want to see that reflected in their finances. But what does sustainability mean in the context of investments?
1. What is socially responsible investing (SRI)?
A simple definition of SRI is that the ecological, ethical and social impacts of your investment are included in your assessment criteria. In recent years, investors have come to agree that not only the environment or child labour should be considered, but the entire context of an investment – and they sum it up in another three letters: ESG (Environmental, Social and Governance) criteria. Within the ESG framework, investment criteria include a wide range of aspects, e.g. does the company pay its taxes? Does it respect the privacy of its employees and customers? Does it make an effort to increase the diversity of its workforce?
2. How do I know if a company is sustainable?
One simple way to invest sustainably is to do it through a sustainable investment fund, like ING Aria Sustainable Bonds, which has just been awarded the prestigious LuxFLAG ESG label. We do the work for you: using a definition of responsible investment and certain sustainability criteria, we select the bonds from which we expect the most potential.
3. What kind of budget do I need to start ESG investing?
You don’t need a huge amount of capital to start investing, whether in ESG funds or classical investment funds. Discuss with your bank or financial advisor how to set up an investment plan for as low as €50 per month. With this approach, you regularly deposit an amount in a sustainable fund.
4. What about the return on ESG investing?
Companies that choose a sustainable approach have a better chance of survival over the longer term as they are exposed to fewer risks, e.g. a company with a transparent purchasing policy has less chances of being involved in a bribery scandal. The reason why ESG investing is considered a win-win solution is that it’s not just good for the environment and society, it’s good for the health of your portfolio as well.
5. Why is sustainable development becoming more and more important for companies?
Sustainability is the single, largest growth theme of the 21st century. If a company is excluded from sustainable investment funds, it can have a negative effect on its share price. Companies affected in this way quickly become aware that sustainability is unavoidable.
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