The wish in society to follow a sustainable lifestyle and make an impact on the world is growing. But do you know the real impact when choosing to grow and invest your money sustainably? (disclaimer: It’s more you can expect)
Read further to see how sustainable investing can help the world and the environment.
What is sustainable investing?
Sustainable investing (also called impact investing, green investing, ESG investing) allows you to direct your money towards companies, governments, and other entities that contribute positively to the planet and society’s well-being.
Sustainable investing enables you to invest your money based on your values and align your money with companies that are taking steps to make a difference. You’re not only investing in your own future or for the sake of financial return, but investing in a positive change to make an impact on the world.
Grünfin is part of a new generation of green fintech companies. We aim to drive capital towards a positive impact. Not only you get selected the best sustainable funds but also reasonable return - we see the long term of sustainable investment can outperform many markets.
We have listed five good reasons why to invest in sustainability with Grünfin.
4 impact levels of a sustainable investing?
The main impact that sustainable investing brings, for environment, society and governance, is the change in the mindset of big corporations.
Many companies align themselves with sustainable goals set by the United Nations that have positive impacts on an environmental, social, and governmental level.
For example, these goals set can support:
- responsible consumption and production,
- good health and well-being,
- gender equality,
- or clean water and sanitation.
If you want to follow a sustainable lifestyle, you’ve probably looked at several options on how to create the biggest impact. But have you ever realised that also your investment decisions can make a change? Way bigger one you could expected.
21 x bigger impact
A UK study found that a green pension is 21 times more effective than giving up flying, becoming a vegetarian and switching to a renewable energy provider at the same time.
For many, sustainable investments haven’t been on their radar yet. However, it’s worth taking a closer look. Sustainable investing opportunities have a lot to offer.
#1 Environmental impact of sustainable investing
Sustainable investing provides money to companies that are working on a better future for our planet.
Many climate funds are aligned with the goals of the Paris Agreement. In Paris Agreement, there is a goal to reach net-zero emissions by 2050. It would help to keep the planet’s temperature below 1.5 C in comparison to pre-industrial times (early-mid 1800s).
Sustainable investing also provides capital to companies that are striving to help the environment in other ways.
Let’s take Nestle as an example.
Nestle doesn’t have the best track record. Throughout its history, Nestle has polluted rivers and offered unhealthy food products. However, through immense pressure and realizing change is needed, Nestle has become a better corporate citizen doing positive things for the climate.
- reforestation programs,
- more usage of reusable paper packaging to protect trees,
- less use of plastic packaging and straws,
- increased use at its factories of electricity coming from renewable sources,
- or programs to help farmers transition to plant-based products.
See how it all works for the sustainable planet?
At Grünfin, we believe in shareholder activism: that using investment decisions to change how corporate money flows has an even bigger immediate impact than supporting smaller impact projects.
Large companies play an important role in our global footprint. That is why we believe that encouraging and forcing positive change at companies like Nestle through shareholder pressure is one of the biggest levers we’ve got.
And you can be part of the change as well!
#2 Social impact of sustainable investing: gender equality and healthcare
Sustainable investing helps companies that support gender equality or work on healthcare. Companies ranking high on social issues are promoting more women to corporate boards, senior management positions, and the overall workforce. These companies also strive for equal pay, longer parental leave, and more flexible working hours.
With your investment, you can contribute to making this a normality. If more people invest in funds that promote certain values, such as:
- tackling climate change,
- gender equality,
- social inclusion, then there’s an incentive for corporations to move towards these values.
Sustainable investments also help companies that innovate in the field of healthcare and are improving people’s lives through better health and longevity.
As well as companies that innovate on better treatments for cancer, diabetes, migraines, Alzheimer, etc.
These are all examples of companies Grünfin invests in.
#3 Governance impact of sustainable investing
Shareholders can pressure companies to act. They can keep their shares and force a company’s management to change via shareholder proposals and shareholder voting.
Asset managers will vote on your behalf, so make sure they are voting on behalf of the issues you care about.
Where does your money go?
An example: AP7, Sweden’s largest national pension fund, has blacklisted Exxon-Mobile, the largest oil and gas company in the west, due to climate concerns. It has also blacklisted JBS, the world’s largest meat processing company, over labour practices.
Being blacklisted by such a large and public fund can cause severe reputational damage to a company. Since the money comes from the savings of Swedish citizens, it is a great example of how everybody’s contributions can have a real impact.
Capital is the lifeblood of many companies’ day-to-day operations and projects. Therefore, capital markets and listed equities have the potential to create positive change.
You as an investor can influence companies by directing your capital to those that contribute positively to the environment and society.
#4 The indirect impact of sustainable investing
In order to meet the Paris Climate Agreement goals, we need innovation.
Sustainable investing has a snowball effect. It creates pressure in a good way.
ESG (Enviromental, Social and Governance) standards will quickly become the new normal. If consumers, communities, companies, governments, regulators, investors, and so on, don’t adhere to the new normal standards, the pressure on them will be immense.
Change may not happen immediately, but it will happen.
And sustainable investing is one of the best ways to help the environment.
How to choose truly green and impactful sustainable funds?
For regular investors, figuring out which ESG funds provide the impact they’re looking for can be a daunting task. We will give you the brief!
European regulators have come up with a piece of legislation called Sustainable Finance Disclosure Regulation (SFDR). The SFDR is designed to help investors understand how fund managers invest and what impact they have on the planet.
SFDR helps to make funds’ objectives more transparent by classifying sustainable funds into categories known as Article 8 and 9.
- Article 8 funds promote environmental and social characteristics, but sustainability is not their core goal (okay but could be better).
- Article 9 is the highest-ranking category (only 3,7% of funds) and means the fund sets sustainable investing as its objective (this is good).
All “green” is not always so green and impactful. Choose wisely!
Recent accusations against ESG greenwashing are a criticism towards Article 8 types of funds (or funds that would not even qualify for Article 8), while Article 9 funds are still a minority – only 3.7% of all fund assets classify under this category. Furthermore, only 0.5% of funds are aligned with the Paris Climate Goals.
At Grünfin, we start with the premise that people after true impact want to see Article 9 highest ranking green funds in their portfolio. We then go a step further and analyze the specifics like:
- the fund’s capital allocation,
- severe controversies in their portfolios and their behaviour as a shareholder – for example, how asset managers vote on crucial issues like the environment or social issues.
How can you maximize your impact?
You may ask yourself how you as an individual, as someone who cares about the planet and wants to have an impact on this world can maximize your impact?
There are some easy ways.
You can invest in companies that are doing good when it comes to the environment and society. Make sure to direct your capital to companies and funds that align with your goals and values.
You can engage with political leaders, whether at the local or national level. Political leaders have been key in pushing through SFDR (Sustainable Finance Disclosure Regulation). They have connections and the platform, so make yourself heard.
The same applies to business leaders. Engage with them so they can change the system from within.
Be a responsible citizen and sustainable consumer. Start to monitor your consumption and transportation and improve it. For example, buy only things you really need and shop local and seasonal, walk or cycle to work, reduce the usage of plastic products, repair instead of buying new. Small things can make a difference already.
And if you want to improve your investment strategy and make an impact on a larger level, look out for sustainable, impact-focused investment opportunities.
Also, watch out for investments that are sustainable only by name and not really focused on positive change.
Open your impactful investment portfolio: for your money and future
Because it really matters which companies you support! Start your sustainable investing already now and the future (you) is than.
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