Climate change and money – how to ensure your portfolio is truly green?

Luxembourg plays an important role in sustainable finance, as it is a leading global financial centre and a hub for international investment funds. There is a strong commitment to sustainable finance and all the actors have been working to promote sustainable investment practices for many years. Luxembourg has been at the forefront of developing and promoting sustainable finance products, such as green bonds and sustainability-linked loans. We also have established several initiatives to encourage sustainable investment, including the Luxembourg Green Exchange, which is the first and leading exchange dedicated to sustainable financial instruments.

Overall, Luxembourg's leadership in sustainable finance is helping to drive the transition to a more sustainable and low-carbon economy, and its efforts make a significant contribution to global efforts to address climate change and other sustainability challenges.

There are many green funds and stocks to choose from, and the best ones for you will depend on your investment goals as well as your risk tolerance. Information is key, hence, browsing to the different web pages of the fund providers allows the potential investor to become familiar with the philosophy and the investment products of an asset manager.

I tend to prefer the "pure" players, those who have sustainable investments in their DNA and have been doing it for decades already while there are also some bigger, more generalist investment outfits that are making an excellent job. When it comes to sustainable stocks, it is rather tricky and dangerous as the "pure" players are usually smaller companies and, therefore, tend to be a bit more volatile than their bigger counterparts.

The same principle can be applied to the stocks: having a look at the web page and looking into the Corporate Social Responsibility report can provide clarity about a company's objectives.

Let me share a little secret: A good place to start is with your favourite sustainable fund and familiarise yourself with the holdings...and maybe even buy one of these companies directly if it fits your criteria!

As stated before, information is key. Once you are familiar and agree with the approach and the philosophy of a specific fund, usually there are no bad surprises as the manager must stick to the stated objectives. Different labels can help, like our local "Luxflag" label, the Belgian "towards sustainability", the French "ISR" or the German "FNG" label already provide assurance to the investor. All these labels apply strict standards and, thus, have the advantage of guaranteeing a certain oversight and follow-up.