Awareness has grown recently of the need to improve the environment in which we live, changing patterns of behaviour to collectively achieve greater efficiency.
Reflecting this new social trend, a new range of products aimed at this consumer profile have been created: ethical investment funds.
Do you know what investment funds are?
An investment fund is a pool of contributions from a large number of investors, controlled by a management company. Based on the profile of its investors (conservative, moderate, aggressive, etc.), the company decides which markets or products to invest in, always seeking to generate adequate returns.
In today’s economic climate, with interest rates close to 0% in the banking market, investing in this type of product offers us the possibility of obtaining a yield on our savings, while choosing the level of risk we are prepared to assume.
What are ethical investment funds?
These are funds which target investment towards businesses that meet a number of ethical, corporate and environmental standards.
The funds allow investors to finance sustainable projects (renewable energy, water treatment, etc.), or invest in markets or companies applying certain values (non-involvement in the sale of weapons, diamonds, etc.).
Why invest in ethical investment funds?
Many of us frequently ask ourselves how we could contribute to society. However, not everyone has the time or ability to do this.
Investing in ethical investment funds allows customers to invest in projects that promote sustainable development, while obtaining attractive returns.
An external auditor oversees how the capital is used, so the investor is assured that it is managed efficiently.
What risk is there and what returns can you expect?
According to the Deusto Business School study “Habilidades de selección y sincronización de los fondos éticos y convencionales europeos” (Skills for selecting and synchronizing European ethical and conventional funds), funds of a more responsible nature offer safer and more positive returns than conventional ones. In the words of Gómez-Bezares, Professor of Finance at the University of Deusto and author of the study, this is “mainly because responsible funds are smaller, simpler to manage, and involve companies that take the trouble to minimise certain risks, such as environmental disasters, occupational safety, reputation and corruption… that could make the investor lose money”.
Moreover, many of the projects mentioned above use Project Finance as a basis for funding, a loan structure that relies primarily on the project’s own cash flows for repayment.
This type of investment is classified as very low risk in the financial sector, as credit institutions carry out rigorous feasibility studies before approving operations.
Investing in ethical funds is not, therefore, only synonymous with a high level of awareness of the world around us, but also an excellent opportunity to invest in a low-risk product with attractive returns.
At RibéSalat, we offer advice for investors who care about the environment in which we live.