Making money while doing good. Isn't it amazing? Sustainable Finance has arisen in the past few years as a relevant alternative for economic institutions. It is the right moment to drive the financial system towards social and environmental responsibility. Originally placed between philanthropy and traditional investment, Sustainable Finance today is even on the agenda of the largest and most prestigious members of the global investment community. By supporting innovative forms of businesses with intentional, sustainable purposes and by incorporating ESG (Environment, Social & Governance) criteria into the investment decision, finance can contribute to the journey towards a better world.
What is sustainable finance?
Sustainable Finance encompasses a broad range of activities, including but not limited to impact investing, ESG screening, and sustainable corporate investment, as well as a large group of actors, such as banks, venture capital & mutual funds, governments, foundations, multilateral organizations, and family offices.
Wherever on this spectrum - as illustrated by Swiss Sustainable Finance on the first graph below on the right side - you will find yourself, you will come into contact with the topic across asset classes in today’s world of finance.
One of the recent, and certainly highly impressive, affirmation that sustainable finance is not at all a niche anymore, but a must for every reputable investor, was this year’s annual shareholder letter by Larry Fink from Blackrock, the world’s largest asset manager: In 2020, $288bn had been invested in sustainable assets, an increase of 96% over the whole of 2019. These investments are necessary in the transition to reach the goal of net zero emissions by 2050. Additionally, Larry Fink emphasized the importance of disclosure with regards to sustainable finance.
Large improvements can be expected through the Sustainable Finance Disclosure Regulation (SFDR) which is effective as of March 2021 in the European Union. Also in Switzerland we have seen a strong traction in interest - and also following actions. Just from 2017 to 2019, assets under management (AuM) in Switzerland almost tripled to more than 1.1bn CHF (see second graph on the right).
With the COVID-19 year 2020, the industry experienced further tailwind due to superior performance compared to their non-sustainable peers. So found Morgan Stanley for example, that U.S. sustainable equity funds outperformed their traditional peer funds by a median total return of 4.3 percentage points in 2020 (Source: Morgan Stanley).
Sustainable Finance Team (From left to right):
Julian Müller, Deniz Nam, Frank Westerhorstmann-Bachhausen, Eloïse Azzola, Janik De Rosa, Louise Lorenz-Meyer, Sophie Lockhart-Smith, Johana Collet, Oliver Meyer
Why is this relevant for me?
Whether you target a career in finance, want to invest your own money sustainably or with an impact, or just care about the planet and the people living on it; sustainable finance will be relevant for you! With increasing demand for sustainable investment solutions, disclosure and transparency, there is a need to understand the drivers behind the transition to more sustainability in financial markets as well as the opportunities and challenges that come with it. It is time for you to engage and learn more about sustainable finance and we offer you the opportunity to be part of the transition.
To do so, you can follow us on LinkedIn to keep up with the newest developments in the industry and not miss important topics and events relevant to you.
Our goal at the oikos St. Gallen Sustainable Finance Project is to share with the student community at the University of St. Gallen what is going on in the field, what this means for your personal career in finance, and connect you with the relevant industry players. We visit relevant organizations working with sustainable finance and prepare case studies to tell you about the opportunities, challenges and perspectives in the field.
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