Sustainable investment, also known as socially responsible investment (SRI), responsible investment, or ESG (Environmental, Social, and Governance) investing, refers to an investment approach that considers not only financial returns but also the impact of investments on environmental, social, and governance factors.

Key Matters and Considerations in ESG

The primary goal of sustainable investment is to generate positive financial returns while also promoting sustainable development, addressing environmental challenges, and creating positive social impact. It involves integrating environmental, social, and governance criteria into the investment decision-making process.

There are different approaches to sustainable investment. Some investors focus on negative screening, which involves excluding companies or sectors involved in activities deemed harmful, such as tobacco, weapons, or fossil fuels. Other investors employ positive screening, actively selecting investments based on their positive impact on sustainability issues, such as renewable energy or clean technology companies.

Another approach is engagement, where investors actively engage with companies to promote sustainability practices and encourage them to improve their environmental and social performance. This can involve dialogue with company management, proxy voting, and filing shareholder resolutions to address sustainability concerns.

Sustainable investment also includes impact investing, which targets investments with the explicit intention of generating measurable, positive social or environmental impact alongside financial returns. Impact investments may focus on areas such as affordable housing, healthcare, education, or renewable energy projects.

The demand for sustainable investment has been growing significantly in recent years. Investors increasingly recognize the importance of considering environmental, social, and governance factors to manage risks and identify opportunities. They understand that companies with strong sustainability practices are more likely to be resilient, have better long-term prospects, and generate sustainable financial returns.

To support sustainable investment, there are various frameworks, standards, and certifications available. These include the Principles for Responsible Investment (PRI), the United Nations Sustainable Development Goals (SDGs), the Global Reporting Initiative (GRI), and certifications like the B Corp certification or the Carbon Neutral certification.

Sustainable investment is not only driven by ethical considerations but also by the recognition that addressing environmental and social challenges can contribute to long-term value creation. It aligns with the growing awareness of the need to transition to a more sustainable and inclusive economy.

Overall, sustainable investment integrates financial analysis with environmental, social, and governance factors to promote responsible investing practices. It aims to generate positive financial returns while also contributing to a more sustainable and equitable world.