Pew-sitters Guide to Sustainable Investing


Investing is one of those topics which may often feel like one is trying to navigate the St George’s Maze - you have various options in terms of direction, some lead to dead ends, others lead you around in circles, and some help you to reach your goal in the center of the maze. Some may have a more pessimistic outlook, viewing investing as the Harry Potter Triwizard Tournament maze, with a lot of unpleasant surprises and unexpected obstacles to overcome. Add in a twist to try to make investing sustainable, then it is no wonder that many people may feel lost in terms of what to look for or where to start. In this article, I will try to simply outline key elements to look out for, in case the reader is interested in Sustainable or Green Investing.

“Let’s start at the very beginning, a very good place to start” - Sound of Music.

The starting point to any investing is to select your stock broker. Compared to prior decades, this has been simplified by many brokers so that you can access a world of securities all on your smartphone. Leading apps in Germany include Trade Republic, Scalable Capital and Degiro. However, there are many others and you may wish to consider opening an investing account with your banking provider.

“Lions and tigers and bears, oh my!” - The Wizard of Oz

Once you have your broker set up, you may be overwhelmed by the amount of stocks, bonds, and ETF’s (Exchange Traded Funds) that are available to invest in. But fear not! For our purposes, we will assume that the reader would like to reduce risk and hence recommend starting with an ETF, which is essentially a basket of multiple stocks or bonds, reducing risk generated by a single company.

“Say my name, say my name”- Destiny’s Child

The second point of reference is to consider the naming of the ETF. Fortunately, in Europe, there are rules to naming funds so that investors are not misled. If the fund name contains any Environmental, Social, Governance (ESG) or Sustainable related term, it is required that at least 80% of the investments should meet the objective it claims. The following rules also apply if certain terms are used:


Once you have identified the fund you are interested in, you are then able to purchase it accordingly to start your investment. The below graph exhibits returns between sustainable funds against their traditional peers who do not exclusively build the fund for sustainable purposes. While sustainable funds have historically outperformed over the past few years, they can experience periods of underperformance depending on regional and sector exposures.


Disclaimer

It is important to note that the market value of the fund will fluctuate given different market conditions and that your capital is at risk. Past performance is no indication of future performance and may not be repeated. This article is for general education, and does not constitute personal investment advice. Personal risk tolerance and financial situation should be considered before investing in capital markets.

Julie Church, CFA, CESGA

Julie is a member of our congregation and a Chartered Financial Analyst (CFA) and a Certified ESG Analyst (CESGA). These global credentials signify a commitment to the highest standards of ethics, education, and professional excellence in investment management and sustainable finance.













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