"Sustainability is a development that meets the needs of the present without risking that future generations will not be able to meet their own needs." *
Sustainable investment means investing in companies that commit themselves to the so-called ESG criteria - environmental protection, social justice and long-term corporate governance.
Most sustainability indices are based on classic indices excluding companies that do not meet the ESG sustainability criteria. As a result of this selection, significantly fewer companies are represented in the sustainable indices. While the MSCI Europe includes 439 companies, its sustainable version, the MSCI Europe SRI, contains only 116 companies (March 2019).
But sustainable is not always sustainable: Depending on the index, different ESG criteria are applied. T MSCI SRI (Socially Responsible Investing) e.g., excludes companies (so-called "negative screening") that are involved in firearms, alcohol and tobacco, gambling and pornography as well as genetic engineering. In addition, companies with a high ESG rating are given a higher share in the portfolio (so-called best-in-class approach).
The MSCI Europe ESG Screened Index takes a slightly different approach. It excludes companies active in the armaments industry, coal, tobacco and fracking industries and who do not honour the U.N. Global Compact Principles for Sustainable Development.
- World Commission on Environment and Development of the United Nations