Assets How to invest sustainably

Investors can pursue three different approaches to sustainable investing: 

The exclusion method: exclude companies and sectors

With the exclusion method, you eliminate from your portfolio all the companies and industries that are not in line with your values. For example, you can exclude investments in companies that are involved in the defense or tobacco industry. 

Investing according to environmental, social and governance criteria (ESG criteria)

The second approach is the inclusion method. Only companies that meet certain sustainability criteria are considered. ESG criteria are usually taken as a guide.
The acronym ESG stands for environmental, social and governance:

• E for Environmental, i.e. ecological aspects.
• S as in Social, i.e. social activities, both internally and externally. 
• G for Governance, i.e. the way the company is managed.
  

Investment according to ESG criteria is currently widespread. This is because this approach allows you as an investor to structure your portfolio according to your personal values and goals, whilst evaluating companies according to ESG issues.

UN’s 17 sustainable development goals are often used as a basis for this evaluation. These goals include no poverty, gender equality, clean water and responsible consumption.

For example, the ESG criteria of an investment are met if a company actively reduces its own CO2 emissions (E), ensures good working conditions, is socially committed (S) and applies diversity principles for its Board of Directors (G).

Impact investing: pursuing measurable ecological and social objectives

Impact investing means attempting to achieve a measurable ecological and social impact with your investment as well as seeking return opportunities. This measurement of the social or ecological effect is the key element of impact investing. At the same time, however, it also makes the investment and reporting process very complex, which is why widely available, profitable investment opportunities are limited.

Whether ETFs, bonds, funds or shares – in principle, a full range of investment instruments is available and will allow you to invest sustainably on the basis of your values and goals.

While it is very time-consuming to evaluate individual securities on the basis of ESG factors, there are certain investment instruments that are explicitly committed to sustainability:

• Green bonds: green bonds are bonds in which the issuers undertake towards investors that they will use the funds invested to finance measures in favor of the environment and the climate. Renewable energies can be financed through green bonds, for instance.
• Sustainable funds: as an investor, you also have the opportunity to invest in sustainable funds, which combine various sustainable investment instruments. One example of this is the UBS Long Term Themes Equity Fund, which invests in long-term sustainable topics and combines them with megatrends such as aging, urbanization or population growth.
• Sustainable passively managed index funds (ETFs): sustainable ETFs allow investors to invest in sustainable companies in a broadly diversified manner. Sustainable ETFs replicate indices consisting of globally active companies that are leaders in the field of sustainability, e.g. UBS Socially Responsible Investing ETFs.
• Development bonds: development bonds are another instrument you can opt for. These are bonds issued by a development bank that pursue the goal of sustainable economic development, for instance. The financial return is closely linked to the achievement of objectives.
• Individual investment solutions: as an investor, you also have the opportunity to have a sustainable portfolio created and managed that is tailored to your needs. For example, with UBS Manage Sustainable Investing.