In recent years, few words have been used as excessively and few topics are now discussed without referring to it. The concept is “sustainability”, and was used in German in the current sense for the first time in the early 18th century. It was German legal scholar Hans Carl von Carlowitz who warned with regard to the area of forestry that one should not harvest more than can naturally regrow. In doing so, the forestry expert laid the foundation for sustainable thoughts and actions, and around 300 years later, one still understands that it is necessary to consider future generations. In the year 1987, the Brundtland report of the United Nations defined sustainable development as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs”. Sustainability is also becoming an increasingly relevant consideration in the area of investments. Just as people nowadays want to know where their food, clothing, and furniture comes from and how it is produced, they also pay attention to where their money goes and what impact it has.

Sustainability done the right way

Over the course of time, sustainability has become a guiding principle for environmental, political, and economic actions. It comprises not only topics such as protection of the environment and climate, but also social factors such as upholding human rights and complying with economic aspects. Following an economy-oriented view, for example, sustainability does not mean making profits which then flow into environmental and social projects, but instead already generating these profits in an environment-friendly and socially responsible manner. Therefore, sustainable development should not need to be promoted by financial sponsorships, but rather should be able to finance itself. It consequently does not help sustainable development if the invested capital was generated in a way that contradicts the overall concept.

A question of responsibility

Nowadays, the term is inseparable from the notion of responsibility. In the corporate world, the short-term principle of shareholder value (and serving shareholder interests) is rapidly making way for the long-term approach of stakeholder value. So if entrepreneurs also incorporate employees, clients, the general public, and government in their business considerations, they assume social and political responsibility. The well-being of a company should thus be ensured over the long term by placing the main focus on the sustainability of its economic success. In this way, acting responsibly becomes a core entrepreneurial duty. What manifests itself is, to put it plainly, responsibility towards people, the environment, and the economy.

Transformation in the financial markets

Capital has a big influence on the development of companies. In the financial industry, sustainability means financial markets assisting in the transformation of social, environmental, and economic factors, thus benefiting the Earth and its inhabitants (How is sustainability measured?). The idea behind this is that if financial means are wielded more sustainably, they will alter our economy, our production, and ultimately also our consumption. The more wealth flows into sustainable investments, the greater the influence that investors have over company representatives [Link: Engagement report]. Investing in sustainability-oriented companies also reduces the capital available for less sustainable or even harmful products and services. So investing in sustainable funds allows one to not only act in a profit-oriented manner, but also effect change at the same time. In this way, one can have an impact by contributing regular amounts to a fund-based savings plan (Good reasons for more sustainability in investment funds).

The data shows that this transformation towards sustainability was set into motion a long time ago. According to the 2023 market report of Forum Nachhaltige Geldanlagen (FNG), the volume of sustainable investments in Austria reached a new record of 67.3 billion euros (as of 31.12.2022) and still grew by seven percent compared to the previous year despite difficult capital market conditions. Sustainable investment funds in particular are responsible for the increase in the volume of sustainable investments. The volume of sustainable investment funds could even increase by 18 percent compared to 2021.

Classification as sustainable

Providers of sustainable financial products are increasingly aware not to solely base their selection decision on the exclusion principle. A simple no to undesirable business practices, production processes, and entire sectors no longer suffices in itself. Far more than this, banks and fund companies proactively invest in companies which apply sustainability criteria demonstrably and in a targeted manner, and which have also embedded these in their business strategy (Sustainability criteria – the integrative sustainability concept of Raiffeisen Capital Management). However, the chance of making a profit does not get neglected and still remains an important selection criterion when structuring a sustainable investment fund. Despite this, capital losses may be incurred in negative market phases.

In an ideal scenario, investing sustainably means being part of the solution and accepting responsibility: for the future-oriented development of the economy, for education, for human rights, and for exerting a positive influence on many other areas of society.