Think about brands like Nike, whose Flyknit Trainer generates on average of 60% less waste than traditional footwear. Meanwhile, luxury brands such as Stella McCartney, for example, are pioneering the use of regenerative cotton to create high-end fashion without harming the planet. Such companies are supporting the movement to make fashion more sustainable.
But it's not just about what we wear; it's also about where we invest. Consider green bonds. They are similar to traditional bonds, but the capital invested funds projects that help the environment by building wind farms, for instance, or installing solar panels. And how about impact investing? That’s when you invest with the explicit intention of generating a positive environmental, social and/or governance (ESG) impact, alongside a positive financial return.
Governments of course set rules and guidelines to make sure companies are transparent about their ESG practices. Here, the Sustainable Finance Disclosure Regulation, which entered into force in March 2021, was a game-changer. That EU regulation was designed to enable individuals to make more informed investment decisions by imposing on financial services firms a set of straightforward disclosure requirements on a range of ESG metrics.
Plenty of additional regulations have followed – covering products, services and companies themselves – all with the same overarching aim of making it easier for everyone to understand what any claim of “sustainability” actually means in practice.
At a time when there is far greater emphasis on ensuring that the same kind of ESG data is reported to the same standard, every financial services firm has a responsibility to contribute to the accessibility of such information. By doing so, customers will better understand that, amidst a jumble of jargon, these changes not only reflect regulatory concerns. Rather, at its essence, sustainable investing is an opportunity to potentially reduce risk, enhance long-term returns and contribute positively to the world we all share.
Everyone can make a difference by thinking hard about where they spend their money and invest. Investing sustainably empowers us to align our financial decisions with our values and contribute to positive change. It begins with thorough research into companies and funds, seeking transparency and a commitment to ESG principles. Opting for funds that contain sustainable investments directs our wealth toward companies that prioritize sustainability, fostering a portfolio that reflects our dedication to a better future.
Active engagement with companies, in turn, amplifies our impact as shareholders. Participating in shareholder meetings and investor coalitions provides opportunities to advocate for improved sustainability practices at companies. By leveraging our voice and influence, we can drive meaningful change from within, encouraging companies to adopt more sustainable policies and initiatives. Additionally, supporting impact investing channels our financial resources into projects and ventures that generate positive ESG outcomes, further amplifying our contribution to a more sustainable world.
At its essence, sustainable investing is an opportunity to potentially reduce risk, enhance long-term returns and contribute positively to the world we all share.
Participating in shareholder meetings and investor coalitions provides opportunities to advocate for improved sustainability practices at companies.
Even small investments in sustainability may yield meaningful results over time. Whether through sustainable funds, impact investing or individual company choices, every dollar or euro invested in sustainability contributes to creating a more equitable and environmentally conscious world.
According to “Make My Money Matter,” a UK campaign, greening one’s pension can reduce one’s carbon footprint 21 times more than going vegetarian, avoiding getting on a plane and switching energy providers. Pension providers tend to be large, so if they invest in companies that are going greener and sell the ones that are not, this will trickle down to company share prices and force real change in the C-suite.
These are just a few examples of how we can help create a more sustainable future for everyone. So whether you're buying sneakers or thinking about your next investment, remember that every choice you make counts.
That’s why, at Quintet Private Bank, we are a signatory to the United Nations-supported Principles for Responsible Investment and a member of Climate Action 100+. We are committed to clear, evidence-based communication on this critical topic. We seek to grow with our clients – including by sharing knowledge and experience – as the partner of choice for all those who aspire to build a solid and sustainable financial future.
The statements and views expressed in this document are those of the authors as of the date of this article and are subject to change.
This article is also of a general nature and does not constitute legal, accounting, tax or investment advice.
