New investors attracted by sustainable finance
The new generations are particularly sensitive to sustainable finance. Some investors want to invest more responsibly. Support is now offered taking into account extra-financial criteria. They are called ESG criteria for environmental, social and governance and allow the impact of companies’ activities to be assessed.
To be present in a responsible fund, a company must, for example, respect certain environmental criteria such as waste management, the reduction of greenhouse gas emissions, the sustainable prevention of risks related to soil contamination or even energy consumption. . The social criterion includes in particular respect for the rights of employees, parity but also the number of people with disabilities. Finally, the governance criterion takes into account the fight once morest corruption and respect for the transparency of executive compensation.
Integrate climate risks into financial decision-making
With climate change, investors are led to anticipate the risks of climate transition and understand how these fit into the company’s strategy. This is also one of the key evaluation criteria for companies. To maintain good performance, investors need to take transition risks into account. These risks represent the consequences of the implementation of low-carbon systems in a company. For example, certain regulations, the integration of technologies, the change in consumer preferences or the increase in the cost of raw materials are transition risks to be taken into account for investors.
Investors must constantly analyze these transition risks concerning all of their assets. Then, make the right decisions to align their portfolio accordingly. Indeed, global warming will undoubtedly force companies to opt for a low-carbon economic model in the years to come. It is therefore necessary to anticipate the financial impact that these changes will have but also the financial losses that may be linked to non-compliance. Investors should therefore carefully monitor regulatory and political developments.
