ESG: investors showing interest in Social dimension
The sustainability standards implemented across Europe have significantly boosted green investments, particularly in the environmental “E” segment. “However, there is also a gradual but steady rise in investments targeting the ‘S’ for social segment in the market”, Daniel Knoblach, Board member of Super Global Services SA, notes.
Beyond traditional green investments like wind power and photovoltaics, there is growing interest in ventures that adhere to social standards. “It has taken some time for investors to embrace these areas on a larger scale”, Knoblach points out. “Merging ethical and moral considerations with financial returns presents an intriguing proposition, although it was long viewed as risky.”
Even within green projects, concerns about greenwashing occasionally arise. “Some investors have introduced products that meet all the criteria”, says Knoblach. “However, they’ve only minimally marketed these products under the green label.” For many, this strategy has been a safeguard against accusations of greenwashing. The establishment of clear standards for evaluation, particularly through independent reviews (“Second Party Opinion”), has alleviated much of the pressure and solidified the credibility of green bonds.
“The same development is now being observed with social investments”, notes Knoblach. Established standards, such as those used by market leader ISS Corporate Solutions for its evaluations, are now in place. “This reassures many investors and encourages the mobilisation of more capital towards this sector”, explains Knoblach. Additionally, social projects not only meet investors’ own criteria or those set within investment guidelines but also enhance reputational value and marketability. Examples of social projects currently financed through the capital market include those in the real property sector, such as student housing and care facilities”, adds Knoblach.
The criteria and requirements vary significantly between environmental and social dimensions. “However, as specialists in ESG products, we have successfully adapted to these diverse requirements”, explains Knoblach. “We can tailor bonds specifically to the project’s needs and issue securities with an SPO, making these investments suitable for inclusion in custody accounts.”