More and more people not only want to increase their money, but also consciously invest it in sustainable projects and companies. But what exactly does “sustainable investment” mean, and how can you ensure that your money really makes a positive contribution to the environment, climate and social concerns?

What does sustainable investing mean?

Investing sustainably means that you invest your money in companies, funds or ETFs that are not only economically successful, but also take on social and environmental responsibility. You can therefore also speak of ethical investing.

In doing so, the so-called ESG criteria a central role:

• E (Environmental — Environment): Companies with positive effects on climate protection, renewable energy, resource conservation or the CO2 footprint.
• S (Social — Social): Companies that are committed to fair working conditions, equal rights and social responsibility.
• G (Governance): Transparent, ethical business practices, good corporate governance and no corruption.

Attention greenwashing: Not everything that looks green is sustainable

Many providers advertise with “green” or “sustainable” investments. But be careful: Not everywhere that says “sustainable” really has a positive impact. Greenwashing describes the phenomenon that companies or financial products are more sustainable than they actually are.

This is how you recognize real sustainable investing:

• Review ESG criteria: Are environmental and social standards clearly defined?
• Take a look at the sustainability report: Companies that are seriously sustainable publish detailed reports.
• Negative and positive screening: Some funds exclude problem industries (e.g. weapons, fossil fuels, gambling — so-called “sin stocks”), while others invest specifically in sustainable industries.
• Are the companies PRI certified? The Principles for Responsible Investment (PRI) set binding standards for responsible investment.

Sustainable investments: ETFs, funds or individual stocks?

There are various ways to invest sustainably. Here are the most common options:

1. Sustainable ETFs — cost-effective and broadly diversified

ETFs (Exchange Traded Funds) track an index that includes sustainable companies. They usually offer broad or wider diversification and low costs. Examples include the MSCI World SRI ETF, DAX 50 ESG ETF or thematic ETFs with specific focuses, such as on renewable energy or hydrogen. However, you should always look at the exact compilation — because not all ESG criteria are always clear — and reflect on how social and environmental sustainability has been defined here and whether this is in line with your values.

2. Sustainable funds — actively managed strategies

If you choose actively managed funds, you opt for professional management by fund managers and deeper ESG analyses, but also higher fees — possibly the service that the fund is truly sustainable. But there is often greenwashing here too.

3. Impact investing — direct positive impact

Here, you decide for yourself and invest specifically in individual companies or projects with measurable social or ecological added value. This is likely to give you the highest direct impact, but you're also taking on more risk.

Investing sustainably: What you should pay attention to

If you want to invest sustainably, you should consider a few aspects:

1. Define your values

• Which topics are particularly important to you? (e.g. climate protection, social justice, renewable energy)
• Would you like to exclude certain industries (e.g. oil, armaments)?

2. Think long term

Sustainable investing not only means short-term profits, but also long-term economic and social benefits.

3. Pay attention to diversification

Sustainable investments should also be broadly diversified in order to minimize risks.

4. Compare costs

Of course, sustainable investments also come with costs. Compare these with each other, in the case of funds or ETFs, for example using the Total Expense Ration (TER), the total expense ratio of the product, and weigh this up depending on the impact they contain. For example, sustainable ETFs often have lower fees than actively managed funds, but may not be as sustainable as funds where a fund manager actively complies with ESG criteria, etc.

Women invest more sustainably — why?

Studies show that women prefer sustainable investments more often than men. This is partly due to the fact that women not only want to make a return, but also want to make a difference with their money.

Conclusion: Investing sustainably pays off

Whether sustainable ETFs, funds or impact investing — there are many ways to invest your money with a clear conscience. Pay attention to greenwashing, understanding ESG criteria and investing over the long term. In this way, you can not only increase your return on investment, but also actively contribute to solving global challenges.

Are you ready for your sustainable investment journey?

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