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Sustainable financial products: What you need to consider
in sustainable financial products Sustainable financial products are financial instruments that are aligned with environmental, social and governance (ESG) criteria. This makes them interesting for investors who, in addition to expecting financial returns, also rely on the sustainable orientation of companies and countries. These products can be consistent with the fundamental goals of sustainable development as outlined in the United Nations Sustainable Development Goals (SDGs). As part of the expanded measures to promote sustainable finance, the European Union has introduced the framework for promoting investments in sustainable activities - the so-called EU taxonomy. However, when investing in sustainable financial products...
Sustainable financial products: What you need to consider
in sustainable financial products
Sustainable financial products are financial instruments that are aligned with environmental, social and governance (ESG) criteria. This makes them interesting for investors who, in addition to expecting financial returns, also rely on the sustainable orientation of companies and countries. These products can be consistent with the fundamental goals of sustainable development as outlined in the United Nations Sustainable Development Goals (SDGs).
As part of the expanded measures to promote sustainable finance, the European Union has introduced the framework for promoting investments in sustainable activities - the so-called EU taxonomy. However, there are some important aspects to consider when investing in sustainable financial products, which we will discuss in this article.
What are sustainable financial products?
Sustainable financial products are investments that invest in companies or projects that have a positive impact on the environment and/or society. Such products may take into account various ESG criteria, including environmental risk management, fair business practices, ethics, anti-corruption, employee rights, diversity and good corporate governance.
Types of sustainable financial products
- Nachhaltige Aktienfonds investieren in Unternehmen, die den ESG-Kriterien entsprechen. Dies können sowohl einzelne Aktien als auch ETFs sein, die einen Index nachbilden, der auf nachhaltige Unternehmen abzielt.
- Nachhaltige Anleihen – diese "grünen" oder "sozialen" Anleihen finanzieren Projekte mit positiven Umwelt- oder sozialen Auswirkungen.
- Mikrofinanzprodukte richten sich an Unternehmer in Entwicklungsländern und unterfinanzierten Regionen, um wirtschaftliches Wachstum und finanzielle Inklusion zu fördern.
- Impact Investments sind Investitionen, die explizit auf die Erzeugung messbarer, positiver sozialer und ökologischer Auswirkungen abzielen.
Why are sustainable financial products important?
Sustainable financial products can help support a sustainable economy and promote transitions to a green and social economy. Investing in sustainable products can minimize the risk of rushing into companies that have a negative impact on our society or planet while generating attractive returns.
The financial sector plays a crucial role in meeting the capital needs of a sustainable economy. Sustainable financial products enable investors to consciously invest in the future while generating financial returns.
What needs to be taken into account when it comes to sustainable financial products
A clear understanding of ESG criteria
An important point when investing in sustainable financial products is a clear understanding of the ESG criteria that underlie the investment decision. It is important to understand how these criteria are embedded in the investment process and how they influence the investment strategy.
Greenwashing
A growing problem in the world of sustainable finance is so-called “greenwashing”. This refers to the practice of portraying products or services as more environmentally friendly than they actually are. Greenwashing can occur in sustainable financial products when financial service providers label products as sustainable that have minimal or no actual positive impact on the environment or society.
Product and provider selection
There is a growing variety of sustainable financial products on the market. It is therefore important to evaluate not only the products themselves, but also the providers. A reputable provider should be able to clearly communicate and substantiate the sustainability criteria they apply.
Performance and risks
It is a common myth that sustainable investments necessarily mean lower returns. In fact, various studies show that companies that pay attention to sustainable business practices can achieve better long-term financial results. However, as with any investment decision, it is important to carefully weigh risks.
Conclusion
Sustainable financial products offer a range of opportunities to both generate financial returns and have a positive social and environmental impact. Nevertheless, they require careful selection and assessment to fully realize their benefits. A careful understanding of ESG criteria, greenwashing, the selection of products and providers as well as assessment of performance and risks are essential.