Sunday, July 21, 2024

Socially responsible investing: is it possible?

Every action you perform has an impact: on the environment, on the current social situation of the place you live in and on the world. The same goes also for your investments, if you choose socially responsible financial products, you can reduce your impact on the world from different perspectives.

Socially responsible investing: what is it?

On the basis of various analysis, it comes out that more and more investors are now ready to change the financial products in which they invest their capitals. This shift lies in the sustainability of the investment that most people prefer. Nowadays, it is possible to build a socially responsible investment portfolio because there are funding instruments which pay attention to specific issues related to their sustainability.

The measure of the sustainability of an investment is known with the acronym ESG: Environmental, Social, Governance. These are the three essential criteria for defining the sustainability of a financial instrument, by measuring its performance in these three specific areas. Therefore, we speak of the impact of a financial instrument, a company, a society on the environment in which it operates, on the social sphere in which it is active, also thanks to the type of governance it adopts.

How to invest sustainably

As stated above, today it is possible to invest sustainably, since credit management companies offer their customers the opportunity to check the ESG performance of a financial instrument. Hence, there are ESG funds, attentive to the environment, social issues, the way governments operate on society and the labour market, the type of salary that the employees of a company earn.

These are measurable parameters, which allow the investors to think long term, not only in terms of future earnings. An investment portfolio based on ESG parameters allows investors to support a cause that, in the long run, will change the world we live in for the better. An action that anyone can undertake nowadays, taking advantage of indicators already available at most of credit management companies.

What are ESG mutual funds

ESG indicators can be applied to any financial instrument. In fact, credit management companies offer this indicator for multiple types of investments, it is up to the individual investor to choose what he or she prefers. Thanks to the current legislation, we can state that these indicators are real and truthful.

The so-called SFDR, a new set of rules on the disclosure of information relating to sustainability in the financial sector, came into effect from 10 March 2021. This regulation establishes different rules that affect the transparency of ESG mutual funds with regards to sustainability risks. In fact, it led to the standardization of information regarding the ESG area, so that these parameters are based on a shared and unambiguous vision. Therefore, this allows to give even greater weight to ESG indicators and the possibility of highlighting sustainable funds from all points of view.

A sustainably managed fund

A fund with a high ESG parameter therefore must commit to invest in specific areas. This is the core concept, which it translates into specific checks and assessments regarding actual daily practice.
An ESG fund must therefore pay close attention to the environmental and social impact of the companies and products in which it invests; however, it is a secondary aspect which it remains measurable by the credit management company that promotes it to its customers.

The credit management companies can prepare an in-depth and careful assessment of the sustainability profile of a fund. However, it is clear that a deviation from reality is always possible, as events that could modify the ESG parameters only affect it throughout the years.

Where to find ESG funds

An ever-growing number of investors are particularly attentive to their impact on the environment and society. These are very important issues felt by a large number of people, who also consider them when they choose the products to include in their investment portfolio. Thanks to this, today more than ever it is possible to find ESG funds with greater ease.

Online investment platforms also offer this type of solutions and professional tend to recommend them to their clients.

Sam Allcock
Sam Allcock
Sam heads up Cheshire-based PR Fire, an online platform that has already helped over 10,000 businesses to grab widespread media coverage on their news at an extremely accessible price point.

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