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Smart Finance: Sustainable Investments

05.09.2022 18:27 | The Worldcitizen Crew (Administrator)

"Sustainable Investments, more than just a trend!" marks the first part of our new blog series - conceived and written by our partners Asset Management Switzerland.

Sustainability is not simply a trending investment topic. Ecological and ethical aspects of investing increasingly become important in fighting climate change, to support the green energy revolution and e-mobility. But green products are not simply a matter of lifestyle or conscience: they also generate higher returns than traditional investments in the long term!

We do believe that sustainable investing is more than a trend and will outgrow traditional investment vehicles within the next few years. In 2021 around USD 650 billion flowed into ESG funds worldwide, representing 10% of the global fund assets. Another steep rise. The awareness for a sustainable portfolio has also long since arrived in Switzerland; within the last 10 years, the volume of investments in sustainable funds has grown by more than +3500%. The wide spectrum of sustainable instruments allows us to cater products for every type of investor. Traditional stocks, ETFs, real estate, bonds, or even commodities can now be replaced by the greener version.

However, what is meant by the term « sustainable » and who decides whether a share is sustainable or not? Unfortunately, there is no clear answer to give, because as broad as the range of sustainable products is, as broad is the variety when it comes to selecting a sustainable investment strategy. To make it a bit easier for you to jump into the investment jungle, we compiled a summary of the most commonly used strategies.

Exclusion: Exclusion is a passive investment approach in which companies or countries are rejected as investments due to non-compliance with moral, ethical, environmental, or social standards. Commonly, companies are potentially excluded from the portfolio on account of their controversial industry affiliation and business activities, such as the tobacco industry.

ESG Integration: As the name suggests, this strategy is about taking into account and integrating environmental, social, and governance factors in the analysis of securities. Investors identify financial factors as well as ESG factors and assess the impact of ESG on company performance.

Norm-based Screening: Norm-based screening excludes countries and companies based on breaches of international standards. Like the strategy of exclusion, complete industries can be excluded if they disrespect the OECD Guidelines for Multinational Enterprises, the UN Global Compact, or the UN Guiding Principles on Business and Human Rights for example.

Best-in-Class: A special form of positive screening, which aims to identify the most sustainable companies within a sector, is the so-called "best-in-class" approach. The strategy does not intend to determine the most sustainable companies across industries, but rather to select those that exhibit the highest ethical or environmental commitment within their sector.

Impact investing: Unlike traditional investing, it is not just the financial return that is taken into account, but also the environmental or social improvement that results from the investment in a company or sector. Impact investing can be interpreted as a strategy that not primarily strives for enterprise or economic value but non-monetary value, like social and environmental objectives.

We got your back!
Still, sounds confusing? To be fair, some of these investment approaches are not as easy for private investors to adapt as they might seem at the first glance. Researching for the «perfect» sustainable product can be quite exhausting and time-consuming. Remember: A sustainable investment will deliver you superior returns – in the long run. So why don't you rather skip this step and let us manage your portfolio? The wealth management team of Asset Management Switzerland AG has a longstanding track record in terms of sustainable investment. By integrating different investment strategies, we shape our client's portfolios as sustainable as possible without losing track of a positive financial performance! And the best part: While we monitor your portfolio you can enjoy a nice cup of cappuccino at the lake.

Questions?  Asset Management Switzerland AG, Christina Lemm

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