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11 October 2023 10h40
Source: Banco Carregosa

5 Sustainable investing trends

5 Sustainable investing trends

 5 Sustainable investing trends


Discover 5 sustainable investing trends and how you can combine profitability and sustainability. 


Sustainable investing is not just a trend. It can help protect the planet and deliver solid financial returns in the long term. Here are 5 sustainable investing options worth considering. 


1. Green bonds – contributing to a greener economy

Green bonds are debt instruments issued by governments, public or private entities with the specific aim of financing projects and activities that have a positive impact on the environment and contribute to sustainability. 

The proceeds of green bonds are earmarked for projects such as renewable energy, energy efficiency, sustainable mobility, waste management and water conservation, i.e. initiatives that have a positive impact on the environment. 


 Global issuance of green bonds

[Source: Reuters]


A key feature of green bonds is transparency. Issuers are required to report in detail on how the capital is being used and how the impact on the environment is assessed and disclosed. 

Green bonds therefore provide a transparent and measurable way to support sustainable projects and help transition to a greener economy.



2. Social bonds – giving back to society 

Social bonds are financial instruments whose proceeds are used to finance projects that have a positive social impact and contribute to the well-being of communities. 

Projects typically focus on education, health, affordable housing, employment, gender equality and other key social issues. 

The market for social bonds is booming, reflecting the growing interest in investments that have a positive social impact. 


 Annual social bond issuance has tapered off since 2021 peak

[Source: BNP Paribas]


Organisations that issue social bonds are also required to report on how the capital is being used and the social impact it has. This type of instrument allows investors to drive positive change in communities and contribute to a more inclusive and equitable society by integrating their own social concerns into their choices and decisions.



3. Sustainability-linked bonds – investing in a responsible future

Sustainability-linked bonds, also known as sustainability bonds, are debt instruments that finance companies that commit to meeting certain sustainability performance targets. They differ from green bonds and social bonds in terms of structure and focus. Rather than funding specific projects or activities, sustainability-linked bonds are linked to broad environmental, social or governance (ESG) performance targets that the issuing company commits to meet. 

As with green and social bonds, the market for sustainability-linked bonds is growing steadily.


 Annual corporate ESG themed bond growth

[Source: Bond Vigilantes]


Sustainability-linked bonds are an incentive for companies to commit to ambitious and measurable ESG targets. The cost of the financing is linked to the achievement of these targets, and if the company does not meet them it can face financial penalties. 

Issuers of sustainability-linked bonds are required to report transparently on their progress towards achieving the targets set. Investors can thus finance the sustainable transformation of companies in sectors that have historically had a major environmental or social impact. This encourages a shift towards more responsible practices.



4. ESG funds – investing with a purpose 

Investment funds that incorporate one or more ESG factors into their characteristics or objectives are another sustainable investment trend. They allow investors to align their personal values with their strategic choices and to support companies that operate in an environmentally, socially and governance-responsible manner.

In many cases, companies with high ESG standards tend to have better long-term financial performance. As a result, ESG funds offer solid financial returns as well as social and environmental benefits, making them increasingly attractive to investors. 


 Fluxos para ETF ESF Europeus

 [Source: Funds People]


In addition, these funds are constantly expanding their universe of eligible assets. The focus has shifted from equities of companies with high ESG standards to a broader range of assets, such as corporate bonds, sustainable infrastructure funds and real estate. And as the demand for ESG funds grows, the industry is developing more advanced and consistent ESG metrics and reporting standards. This will enable a more accurate assessment of companies’ ESG performance and help investors make more informed decisions.



5. Impact investing – driving change 

Impact investing directs capital to projects that combine social and environmental issues, creating a dual positive impact. The aim is to respond to the increasingly complex challenges that society is facing. It can include areas such as health, education, gender equality, poverty, inclusive employment and access to technology, providing access to a very diverse investment portfolio.

In addition, investors (with materially relevant/qualified positions) can take an active role in the companies in which they invest, such as voting at meetings, planning responsible practices and working with management to improve ESG performance.

Impact investing is also a way to diversify an investment portfolio, as the assets are not strictly correlated with traditional stock or bond market movements. It is an innovative approach that offers opportunities for those who want to make a difference while increasing the value of their assets. 

In other words, it is important to emphasise that impact investing is not just about optimising profitability, but also about creating a real benefit/impact for society.



Banco Carregosa – at the forefront of sustainable investment

Sustainable investing offers the opportunity to be part of growing industries that are revolutionising the global economy, while helping to protect people and the planet. 

However, as with any other type of investment, prudence is required when analysing and managing your portfolio. Let Banco Carregosa’s team of experts advise you and share their strategic knowledge to ensure that your wealth is protected.