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Glossary > Asset Class

Responsible investment

Responsible investment

First appearing several decades ago, responsible investment was for a long time a niche market segment, but has enjoyed a boom since the 2008 financial crisis. This investment approach involves integrating non-financial factors, such as environmental, social and governance (ESG) criteria, into the analysis of an asset.

Today, responsible investment has become vital and its role in any portfolio continues to expand. There are several ways of integrating ESG criteria into investment decisions; the main ones are exclusion, ESG selection (“best-in-class” and “best-in-universe” approaches), thematic investment and, more recently, impact. It is possible to combine these different approaches and investors can also encourage firms in which they hold equity to adopt more sustainable practices, for example by engaging in dialogue with companies or by exercising their voting rights at AGMs.

During the last decade, responsible investment regulations have been strengthened considerably. This development has resulted in regulators becoming aware of the important role that the financial sector has to play, especially as part of the roadmap that was drawn up as part of the Sustainable Development Goals (SDGs) adopted by the United Nations in 2015. This also reflects a genuine wish on the part of the regulatory authorities to harmonise practices in order to avoid the risk of greenwashing.

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