What you need to know about sustainable investing
Jul 22, 2025
Terms like ESG, screening, or impact investing are becoming more and more frequent – but what exactly do they mean? In this blog, we give you an overview of the most important concepts around sustainable investing.
You may have noticed it while scrolling through social media or in an ad on the tram: The topic of investing has gained significant presence in Switzerland in recent years. And how we invest our money has an impact on our environment – in a double sense. On the one hand, the accumulation of money bring with it a certain amount of social power – on the other hand, the companies we support with our investments leave a footprint in nature.
Investors in Switzerland find the aspect of where their invested money actually flows increasingly important: According to Swiss Sustainable Finance, for example, the volume of sustainability-related investments rose to 1.881 billion CHF at the end of 2024, which represents an increase of 13% compared to the previous year.
What exactly does it mean to invest sustainably?
But what does «sustainable investing» mean concretely? There are different strategies to make your portfolio more sustainable: You can filter stocks or ETFs using the ESG label, thereby including or consciously excluding certain titles from your portfolio. This is known as screening. Or you can engage in impact investing or transition financing.
Before we get to the explanations of the terms: As you have certainly noticed, there is no universally applicable definition for sustainable investing. Many terms leave some room for interpretation – probably due to the fact that sustainability in the financial sector is still a relatively young and lightly regulated topic.
An ESG label is created by a rating agency, for example. However, different rating agencies can issue ESG labels and arrive at different results. This makes comparison difficult. Moreover, it means: Many stocks and funds are given an ESG label, but how environmentally friendly and socially responsible the company behind them, or its management, really is, can vary.
In the worst case, this can lead to «greenwashing», which means that, for example, a stock you invest in, or the company behind it, only creates the illusion of being environmentally friendly and socially beneficial – but it is not.
But even if this extreme case does not apply, caution is advised. Because, according to HSLU Professor Manfred Stüttgen, the notion that sustainable investing means investing in a company whose actions always have a positive impact on the environment and society is «a common misconception.» Furthermore, according to the HSLU: «For example, a cement manufacturer may be newly included in a sustainable fund because it has significantly reduced its CO2 emissions and produces less emissions than its competitors. However, this does not necessarily mean that the company is fundamentally good for the environment, but only that certain ecological or social criteria are considered.» You should therefore look closely if you want to know which company is behind an ESG stock or an ESG ETF.
ESG: focus on Environment, Social, and Governance
The three letters ESG stand for «Environmental, Social, Governance» – and these are precisely the three areas that the focus of an ESG financial product lies on. So, if you buy an ESG ETF, the companies behind the ETF take care of positive ecological and social demands and actions – in what they do and how the companies are managed.
The term «Environmental» covers everything related to a company's impact on the environment. For example, the question of how large a company's CO2 footprint is and how polluting the production of a product is. The term «Social» involves the question of what societal influence a company has – for example, issues surrounding diversity or human rights. And «Governance» refers to topics like the treatment of shareholders or generally the transparency from corporate management. Influence through voting rights and corruption prevention, or handling such cases, also falls into this area.
Screening: what belongs in your portfolio?
One way to set up a green portfolio is through so-called «Screening». This refers to the selection process with which you compose your portfolio. Do you want to exclude the most environmentally harmful titles (negative screening or exclusion) or pack the ESG top-ranked titles (positive screening) into your portfolio?
Furthermore, there are approaches that go beyond pure ESG screening. By only considering companies that meet the regulatory requirements for the Paris Agreement, for example.
Or Swisscanto, which refines norm-based screening with thematic assessments such as product future viability, active engagement, and its own evaluation models with their new ESGeneration ETFs.
Impact investing: focus on impact
If you want to go a step further, so-called «impact investing» is worthwhile – that is, impact-oriented investing. This means your investment has concrete environmentally friendly or socially beneficial consequences. And ideally, you earn something in the process. Because: Impact investing is not a donation, so it is not philanthropy, but an investment vehicle.
Transition finance: investing in change
In the context of «impact investing», the term «transition finance» is also relevant: Behind this is the idea of investing in so-called brown companies that are not yet particularly environmentally friendly or socially compatible and, through investment, leading them onto a greener and more social path – that is, transforming them. In reality, however, this can prove to be very complex and complicated, and it is also a young field in the financial industry. Nevertheless, transition finance shows that investing is not just about multiplying your money, but also about achieving something with it.
And is it financially worthwhile?
Essential in all these investment opportunities, of course, remains the question of whether it is also financially worthwhile. And the answer is «yes». A meta-study by the NYU Stern Center for Sustainable Business and Rockefeller Asset Management from 2021 shows a positive correlation between ESG activities and stock performance:
58% showed a positive correlation between ESG activities and operational or stock performance
The result is based on a total of 1'400 individual studies and confirms the trend that previous studies also showed – it is not a financial disadvantage to invest sustainably.
What neon offers you in this area
At neon, we offer a variety of investment options with «neon invest». We have various ETFs that aim at ESG or stricter criteria – such as those from Swisscanto – and have curated them under the topic «ESG» for you. Many of them are even available without transaction fees – find more info on our 0% specials and the composition of Swisscanto ESG criteria here. Additionally, in our investment plan templates, you have the option to select the «Sustainable Focus», which replaces standard ETFs in the template with ESG ETFs.
If you're interested in impact investing, our partner, the Swiss fintech Inyova, is the right place for you. It specialises in impact investing and provides the opportunity to invest in a deep green way.
