More and more frequently, we hear the term "Sustainable Finance" and it is easy to make the mistake of confusing it with philanthropy, thinking that, by choosing this type of investment, we will have to sacrifice profits for a higher good, the common good. However, the concept of sustainability teaches us precisely that it is possible to match the concepts of financial returns with positive social impacts.
This is why, from traditional finance to philanthropy, a path has been taken that has allowed the development of what is now known as sustainable finance, also called "green finance" or "responsible finance", which mainly refers to environmental, social and governance (ESG) criteria.
In this type of finance, the investor seeks, as in traditional finance, to generate profitable financial returns, with the difference that, in addition, they are supporting businesses, companies or projects that are in some way creating value by protecting the environment and/or providing benefits to society.
In this regard we find the following examples of sustainable investments:
ESG Investments: Companies, enterprises or projects have evaluations through ESG standards or certifications according to their environmental, social and corporate governance practices.
Selective Investments or "Screen Investments": They are selective because they discard companies, projects or sectors that have risks or are not aligned with the investor's values. For example, according to the latest study on Sustainable and Responsible Investment in Spain by Spainsif, 36% of those who responded to the survey discard companies for reasons of non-compliance with human rights, 29% for labor issues and 31% for aspects of corruption and bribery within organizations.
Thematic Investments: Focused on a single issue, whether environmental, social or governance. Although this type of choice is viable, in my experience, the general opinion is that there must be coherence between the three issues, since it would not be congruent, for example, to carry out interventions in favor of a social group external to the company while violating the human or labor rights of those who collaborate with the company.
However, with so many options in the market and with so much distrust in relation to whether what is presumed at the marketing level in companies is real or is what we know as "greenwashing", it is important that, when choosing sustainable investment, it has gone through a process or methodology for measuring the impact of impact investment (it seems redundant, but that is what it is called...it is known as "MEIII").
To evaluate the impacts of this type of investments there are different types of methodologies and the choice of which methodology to choose will depend a lot on what, whoever chooses it, wants to achieve with the evaluation, as well as the stage in which the company or the project is. This is why a careful analysis is required before making the decision, in order to develop the appropriate strategy in each case. All methodologies are valid, but not all are appropriate for every situation and moment.
The path towards the achievement of true sustainability is not simple, but it is necessary, urgent and perhaps the only one we have to continue advancing as humanity.
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