The term sustainable investment, more largely embedded within sustainable finance, refers to the process of considering environmental, social, and governance (ESG) criteria in business or investment decisions, with the goal to create lasting benefits for the client, the society as a whole as well as for the environment. Within the EU context, sustainable finance is understood as doing finance in a way that supports economic growth, whilst reducing the pressure onto the environment, and simultaneously considering social and governance aspects. Used as a set of standards by investors to screen potential investments, ESG criteria are the foundation of the concept of sustainable finance. The "E" in ESG considers environmental issues, such as resource depletion, water, energy or waste management. It also considers the company’s ability to mitigate and adapt to the problematic of climate change. This includes the safeguarding of the environment in a broader sense, such as the preservation of biodiversity, pollution prevention, or circular economy. The social aspect of the ESG criteria considers issue such as inequality, inclusiveness, labour relations, investment in human capital and community, or human right issues. The third and last aspect, considers corporate governance factors, such as business ethics, leadership, management structure, employees, audits, or executive remuneration. The "G" plays a fundamental role in ensuring the inclusion of social and environmental consideration in the decision-making process of both public and private institutions
Sources:
European Commission. (2021). What is Sustainable Finance.
Swiss Sustainable Finance. (2021). What is Sustainable Finance.
University of Cambridge. (2021). What is responsible Investment.
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