Sustainable finance

According to PRI (Principles for Responsible Investment) - a UN initiative launched in April 2006 that puts investors working together in order to comply with the six principles of responsible investment:

Responsible investment is an approach to investments that aims to incorporate Environmental, Social and Governance (ESG) factors into investment decisions, to better manage risk and generate sustainable, long-term returns. 

The idea is to have investors with enough information that allows them:

• to implement a sustainable investing program, excluding companies involved in controversial issues;
• to support the most sustainable companies, focusing on environmental, social and governance (ESG) exposures, and/or to use ownership to engage with those companies;
• to report its activities by becoming signatories of the Principles for Responsible Investment (PRI).

According to the latest data from the Global Sustainable Investment Alliance, sustainable responsible investment (SRI) totals 35.4 trillion US Dollars (AuM - Assets under Management) corresponding to 36% of the total market. Europe and the US continue to hold the largest shares of total SRI assets(2020 data). It is estimated that this figure represented 40 trillion US dollars in 2020, and that this figure will increase by 10 trillion every two years (Source 2020 - ESG Data Integration by Asset Managers: Targeting Alpha, Fiduciary Duty & Portfolio Risk Analysis). See all the details here.

In Europe, according to EUROSIF (the main European organization responsible for promoting sustainable and responsible investment), SRI investment is based on 7 investment strategies (Best-in-class; Sustainability themes; Norm-based screening; Integration of ESG factors; Exclusions; Impact investing; Engagement and voting). 

1. Negative Screening: The exclusion of a company from a given SRI fund or index is based on one or more specific ESG criteria;

2. Norm-based screening: Inclusion depends on an analysis of the companies and other issuing organizations, according to their compliance with international norms and conventions; 

3. Best-in-class screening: The inclusion of a company is based on its performance compared to the best examples within a given universe; 

4. ESG integration: The systematic and explicit inclusion of ESG factors in a financial analysis process by asset managers.;

5. Corporate engagement: The position of investors on ESG issues, requiring companies in which they invest to improve their practices;

6. Sustainability-themed investing: Inclusion is related to themes or assets involving sustainability;

7. Impact investing: specific investments, usually carried out in private markets, for the resolution of social ot environmental problems.

The growth of SRI investment is closely associated with the creation of sustainable products, most notably the evolution of sustainability indexes. These indexes assess the ESG performance of company practices based on the various methods created by information suppliers ('sustainability raters'). For further details press here. 

The responsible investment also promotes the development of the green bonds. The main goal is to have capital flows that support the development of a more environmentally friendly, low-carbon and climate-resilient economy. For further details press here.