Making sustainable and profitable savings easier

2021-11-09
Making sustainable and profitable savings easier

Would you like to contribute to the climate transition while helping your savings grow? The UN trade organisation estimates that annual investments in the region of USD 5-7 trillion is needed to reach the Sustainable Development Goals in the 2030 Agenda for Sustainable Development, including measures aimed at combating climate change. "Investing in a sustainable manner should be both easy and profitable," says Rebecca Jansson at Handelsbanken Fonder.

At present,an estimated one out of three investors choose sustainable funds, according to a survey by the Swedish Investment Fund Association. So it's not surprising that an increasing number of people are opting for more sustainable saving solutions.

The world's largest purchase order

Sustainability is a mega-trend that is here to stay. The World Bank estimates that infrastructure investments of around USD 90 trillion, more than one hundred times the market capitalisation of Tesla, is needed over the coming decade to reduce emissions and mitigate the effects of climate change that are already happening.

According to the UN's trade organisation, annual investments in the region of USD 5-7 trillion would be needed to reach the Sustainable Development goals in the 2030 Agenda for Sustainable Development, which include measures aimed at combating climate change. Funds from the public sector or non-profit sector will therefore not be enough.

"The 2030 Agenda for Sustainable Development is the world's largest purchase order," says Rebecca Jansson at Handelsbanken Fonder.

The main factor that distinguishes sustainable funds from other funds is that they normally adopt one of the following strategies:

• Excluding controversial sectors, such as arms, alcohol, tobacco, gambling, fossil fuels and pornography.

• Applying specific sustainability criteria that a company needs to meet to be included in the fund, for example measurable goals for climate transitioning.

• Using their shareholder stake to influence the company's sustainability strategy by exercising their voting rights at annual general meetings.

Profitability and sustainability go hand in hand

More women than men choose sustainable funds, but the trend is increasing among men. The same applies for sustainability in general, with more women being prepared to make lifestyle changes for the sake of the climate. And yet, unlike a situation where you refrain from consumption altogether, selecting sustainable funds does not mean that you need to give up on the idea of high returns.

"This is a myth. On the contrary, long-term profitability and sustainability go hand in hand," says Rebecca Jansson.

Sustainable equity funds have on average generated higher returns (10.4%), compared to other equity funds (9.2%) in Europe during the period 2016-2020, according to the European Fund and Asset Management Association, Efama.

"The winners of tomorrow will be those companies that contribute to the transition towards sustainable development," emphasises Magdalena Wahlqvist Alveskog, Chief Executive of Handelsbanken Fonder:

EU introduces new green category for funds

In an attempt to channel more private capital towards sustainable investments, the EU has introduced a new investment fund category.

Light green funds are those funds which promote environmental or social solutions, whereas dark green funds have sustainable investments as their goal.

"By investing in sustainable funds, you are directly contributing towards the development of a sustainable society and can let your money work for you while you take a nap," says Rebecca Jansson.

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Climate change in focus at COP26

On 31 October, the UN Climate Conference COP26 opened in Glasgow, welcoming a host of the world's decision-makers. The event has been described as the last chance to get a grip on climate change. The financial sector has a considerable responsibility to transfer capital to sustainable companies to reach the goals of the Paris Agreement, in other words, to keep the increase in global temperatures to less than 1.5 degrees. The interest in sustainable investments is on the rise, and this is a trend that is here to stay.

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