Key points in a nutshell:
- Sustainable funds are investment funds that invest in companies meeting strict criteria regarding environmental, social and governance (ESG) aspects.
- They offer the opportunity to achieve attractive returns while also making a positive impact on society and the environment.
- There are various types of sustainable funds, including impact investing funds, SDG-aligned funds and ESG funds.
- The sustainability of funds is measured by various rating systems, and transparency is crucial to avoid "greenwashing."
- radicant also offers sustainable funds aligned with the United Nations' Sustainable Development Goals (SDGs). They are all classified under Article 9 of the EU’s Sustainable Finance Disclosure Regulation (SFDR), the highest level of the EU’s transparency requirements. Do you want to learn more? Then visit our investing page.
1. What are sustainable funds?
Sustainable funds are specialised investment funds that deliberately invest in companies that have positive impacts on the environment and society. They, for example, focus on companies that employ green technologies, generate renewable energy, take on social responsibility, or exhibit exemplary corporate governance.
To ensure compliance with sustainability standards, these funds conduct rigorous assessments of companies. Some funds also exclude sectors such as weapons or fossil fuels.
There are various approaches to sustainable investing. ESG funds integrate specific sustainability risks into their investment decisions. Impact-oriented funds, such as SDG-aligned funds, adjust their investments according to certain values or criteria. Impact investing funds, in turn, have the clear objective of creating measurable positive social or environmental impacts.
To ensure compliance with sustainability standards, these funds conduct rigorous assessments of companies. Some funds also exclude sectors such as weapons or fossil fuels.
There are various approaches to sustainable investing. ESG funds integrate specific sustainability risks into their investment decisions. Impact-oriented funds, such as SDG-aligned funds, adjust their investments according to certain values or criteria. Impact investing funds, in turn, have the clear objective of creating measurable positive social or environmental impacts.
2. Why should I invest in sustainable funds?
Sustainable funds offer both financial and societal benefits. Economically, these funds have the potential for attractive returns. Studies show that companies with sustainable approaches often perform better financially than others. At a societal level, they allow you, as an investor, to support companies that have a positive impact on the environment and community.
By investing in sustainable funds, you can not only grow your wealth but also contribute to a positive development and simultaneously build better portfolios. Furthermore, you take a step towards a better world.
3. What types of sustainable funds can I invest in?
There are various types of sustainable funds that you can invest in:
- Impact investing funds: These funds invest in companies that have measurable positive social or environmental impacts.
- SDG-aligned or impact-oriented funds: These funds invest in projects or companies contributing to the achievement of the UN's Sustainable Development Goals (SDGs).
- ESG funds: These funds invest in companies that perform well in environment, social and governance (ESG) areas.
4. How "sustainable" are sustainable funds really?
The sustainability of funds is measured by various rating systems, including SDG and ESG ratings. Transparency is crucial to avoid "greenwashing," which involves pretending to be sustainable while not truly adhering to sustainability principles.
The Sustainable Finance Disclosure Regulation (SFDR) is an EU framework that promotes transparency regarding sustainable financial products. It requires fund managers distributing their products in the European Economic Area (EEA) to disclose information about the sustainability of their funds, including criteria for selecting companies and impacts on the environment and society.
The SFDR aims to ensure that sustainable funds live up to their promises and allows investors to make informed decisions. Additionally, the regulation includes a mandatory self-classification of how sustainability aspects are taken into account:
- SFDR Article 6: Non-sustainable funds with limited consideration of ESG risks in the investment process.
- SFDR Article 8: "Light green" funds that consider sustainability risks in the investment process and promote environmental or social characteristics. ESG funds can fall under this category.
- SFDR Article 9: "Dark green" funds that consider sustainability risks in the investment process pursue financial objectives alongside specific sustainability goals contributing to environmental or social goals. Impact-oriented and impact investing funds can fall under this category.
The SFDR also introduces a definition of "sustainable investments" as investments in a company's economic activities that contribute to an environmental or social goal, provided that such investments do not significantly harm these goals and that the invested companies apply good corporate governance practices.
The SFDR also mandates disclosure of risk-based sustainability indicators for a range of environmental, social, and governance aspects, where financial products must indicate whether investments will have negative or adverse impacts. These so-called Principal Adverse Impacts (PAI) are a set of indicators that must be disclosed to show how they are considered in the investment process.
At radicant, we value transparency and have developed our own rating system to ensure that we only invest in companies making a positive contribution to sustainable development on our planet. Furthermore, radicant's sustainable investment funds are all classified under SFDR Article 9.
5. How can I invest in sustainable funds?
If you want to invest in sustainable funds, it's important to first define your financial goals and values:
- What do you want to achieve with your investment?
- What type of impact is important to you?
These questions will help you identify the type of sustainable fund that best aligns with your goals.
Once you’ve defined your goals and values, the next step is research. There are numerous sustainable funds on the market, and it's essential to take the time to understand the different options.
Consider the fund's performance, investment strategy, and sustainability criteria. Some funds may focus more on environmental issues, while others have a broader social and governance focus.
Another key aspect of investing in sustainable funds is choosing the right providers. This is where radicant comes in. We offer a range of sustainable funds aligned with the UN's 17 Sustainable Development Goals (SDGs). Our funds are designed to invest exclusively in companies that seek both positive social and environmental impacts while also aiming for returns in line with the market. Additionally, we provide a sustainable banking solution that allows you to manage your money in a way that aligns with your values.
6. Conclusion: Sustainable funds
Sustainable funds offer a unique opportunity to achieve returns in line with the market while making a positive impact on society and the environment. They respond to the growing demand from investors for investment opportunities that align with their values.
The diversity of sustainable funds allows you to invest in various areas, ranging from renewable energy and energy efficiency to social projects. However, it's important to carefully examine the sustainability criteria and practices of funds to ensure that they truly have a positive impact and are not merely a case of "greenwashing."
And if you're looking to start with sustainable investing, radicant is the right place! radicant is Switzerland's first digital sustainability bank, making sustainable banking and investing the norm – and for good reasons:
Our investment funds invest exclusively in companies and institutions that have a positive effect on society and the planet. We use the UN’s 17 Sustainable Development Goals (SDGs as an independent criterion for this purpose. Furthermore, we have developed a rating system that always shows you the impact the companies in your portfolio have on the SDGs. And our portfolio managers ensure that your money is not only invested sustainably but also professionally and diversely.
And that's not all! At radicant, you also benefit from truly sustainable banking – without basic fees.
Interested? Then open your radicant account in just 5 minutes – digitally and without any paperwork.
