Sustainable finances | 18 June, 2019

Increased demand for sustainable investment solutions

Selena Bellosta Relationship Manager

We are faced with a new wave marked by sustainability. In recent years, there has been a rise in demand for socially responsible investment solutions. The notable increase in awareness of economic, social and environmental sustainability is now also being clearly reflected in customer investments.

Millennials, in addition to supporting the concept of sustainability, have lifestyles which are consistent with this idea. Currently we find these investors focused on the idea of growing their savings through financial products recognised as responsible financial vehicles.

What is sustainable and responsible investment?

Sustainable and responsible investment follows Environmental, Social and Governance (ESG) criteria. This consists of taking into account the application of environmental, social and good governance factors in the management of investments. The main stock markets all have sustainable indices, which we can invest in without losing sight of obtaining a profitable return. These indices demand that companies implement good business practices before they can be admitted to these financial vehicles.

In the following chart we observe that there is a positive correlation, close to 1, between the performance of the global sustainability index and the world index.

The increase in investor satisfaction when choosing these types of products, which are in line with their values, indirectly implies greater control over companies, generating greater transparency in relation to their sustainable activities and positively improving their impact on society.

Companies that have social responsibility policies and make a positive contribution to society gradually improve the perception that consumers have of them. In addition, these companies improve their corporate image and future prospects, and increase their value.

Some of the global sustainability indices are:

MSCI ESG Indices

MSCI, the world’s largest provider of indices, also maintains a family of ESG indices, which follow environmental, social and governance criteria. MSCI has classified different institutions and companies based on these criteria. With this ESG factor, companies and countries are assessed on how far advanced they are in relation to sustainability. Those who have achieve this particular rating are admitted to this index.

You can learn more about this index on its website (in English and Chinese):

Dow Jones Sustainability Index (DJSI)

The DJSI index was launched in 1999 as a family of sustainable investment indices. It was a benchmark in responsible and sustainable investments, and encompasses the actions of leading companies in economic, environmental and social terms. The methodology used by this index to classify its companies is based on the RobecoSAM Total Sustainability Score, an annual assessment of companies’ sustainability practices and with which over 4,500 companies are analysed every year worldwide.

There is more information about this index on the RobecoSAM website (in English)

London Stock Exchange Sustainability Index (FTSE4Good Index)

The London stock market’s sustainability index was created in 2001. This index includes companies that comply with corporate social responsibility and environmental practices, maintain ethical relationships with shareholders and are aligned with human rights. This index was created with the collaboration of UNICEF, and uses information provided by the Ethical Investment Research Service (EIRIS).

Learn more about this index on its website (in English and Chinese)