Sustainability is much more than a passing fad. It has been with us for decades and is here to stay, also in the financial field.
The importance of sustainable finance and socially responsible investments has not stopped growing. If you believe that a better, greener and fairer world is possible, this will interest you.
What is sustainable finance?
Sustainable finance refers to financial decisions that are made by introducing criteria that are not strictly financial. This may sound a bit complicated, but it simply means that decisions are made beyond what the numbers say, by introducing a series of criteria.
And what are these criteria? Mainly issues that have to do with the environment, social impact, ethics or equality, to give four examples.
For example, a company can choose its supplier based on price and quality or also consider the environmental impact of that supplier or how it treats its employees.
All these principles of sustainable finance crystallize in the so-called ESG or ASG criteria.
What are ESG criteria?
ESG stands for Environmental, Social and Governance and refers to the three axes or factors of sustainability. They are translated into Spanish as ESG or environmental, social and governance criteria.
ESG criteria are those that make a company manage itself sustainably, both internally and externally, causing a positive impact on people and the environment, with a governance framework based on ethics, values and responsible and transparent behavior. At Unión de Créditos Inmobiliarios we publish the sustainability report annually, in which we transparently share the relevant business figures and the main milestones of the year, among others.
These criteria summarize the three areas or criteria that measure the extent to which a company is responsible.
The environmental part refers to the company's environmental impact, its policies to reduce it and the management of the carbon footprint. They measure issues such as the use of renewable energy, the scope of its emissions, the waste it generates or the materials it uses.
Social criteria take into account the company's impact on society and the community in which it is located. They measure respect for human rights, the working conditions of its employees, its supply chain, safety at work and its contributions to the community, among other things.
Finally, the governance part measures the corporate ethics of companies, their accounting practices and how they make decisions, their control mechanisms or the remuneration of their executives, among others.
All these criteria determine whether a company is sustainable. , a principle in vogue when it comes to investing.
How to invest sustainably?
Socially responsible investment or SRI takes all of these criteria into account when choosing how and where to invest money.
The easiest way to do this is with an ESG integration criterion. And what does that mean exactly? Well, investing only in companies that meet the criteria you have seen. One thing you can do is choose companies one by one or through investment funds that invest according to these guidelines.
Fortunately, SRI investment has not stopped growing and it is becoming easier to detect these socially responsible companies and products. According to the study “ Sustainable and Responsible Investment in Spain 2023 ” by Spainsif and DWS, the share of assets managed with any type of social responsibility has increased by 1.5% in 2020. ESG criteria represent 55% of the total.
In Morningstar allows you to search for funds based on SRI criteria and there are even indices such as the EuroStoxx Sustainability 40 or the MSCI World ESG Screened Index.
Sustainable financing: it also exists
Sustainable investment also has its side in the area of finance. As an investor, you can invest in green bonds and ESG fixed income. These are bonds from companies and governments whose funds are used to finance projects that respect the environment and are considered socially responsible.
Most commonly, they are used to finance impact projects such as renewable energy plants, improving the company's vehicle fleet or waste management projects.
A different type of sustainable financing is that which affects mortgages. There are green mortgages on the market that offer better conditions for those who buy a house with an A energy certificate or build an energy-efficient house. There is also financing aimed at rehabilitating communities of owners .
Sustainable finances in your home and in your household
Beyond investments and mortgages, it is also possible to bring sustainable finances to your home.
In terms of sustainability, it means focusing your purchases on products from companies that meet the criteria you have seen. The easiest way is to reduce travel, buy in nearby centres, consume seasonal products or avoid of certain companies.
