How Do You Check if an Investment is Sustainable?
The European Union has introduced regulations to increase transparency and prevent misuse of the word sustainable (greenwashing). This allows investors to make more conscious choices for investment funds and companies committed to a sustainable future.
Large companies report on a wide range of ESG topics, and these reports are verified by independent experts.
The managers of sustainable investment funds select companies based on their scores for all ESG factors. How sustainable these investment funds are is then determined according to European rules. There are three classes:
- Grey, or investment funds according to Article 6 SFDR: These funds do not consider sustainability goals when choosing investments.
- Light green, or investment funds according to Article 8 SFDR: These funds promote environmental or social objectives, such as reduced CO₂ emissions or equal treatment.
- Dark green, or investment funds according to Article 9 SFDR: These are explicitly sustainability-focused investment funds. The requirements for a dark green fund are therefore very high for all ESG factors.
Whether a fund is grey, light green, or dark green, and under which article of the EU rules it falls, can be found in the Key Information Document (KID).