Sustainability: How Invesdor Implements ESG, SDGs, and More

Sustainability, equality, and responsibility are the key issues of our time. These three topics not only impact society and politics but also the economy and the investment sector. Invesdor even dedicates specific guidelines to them.

‘That the world needs change is beyond question,’ says Invesdor CEO Christopher Grätz. He also emphasizes, ‘But it won’t change on its own – someone has to take action. And, above all, someone has to finance it.’ As a pan-European impact investing platform that emerged from the merger of several platforms from different European countries, Invesdor has focused on one key question: If the most significant progress in the world is made by adventurous, entrepreneurial individuals who have the courage to think differently, what if we gave this opportunity to everyone? The opportunity to decide what kind of future they want to pursue? The chance to choose which companies can bring about this change? And the chance to participate in financing it all?

At Invesdor, we believe that investors can shape their future by investing in companies they believe in. This forms the basis of our call to investors: Let’s finance the future together. People have long decided – as shown by societal trends in recent years – what this future should look like: more sustainable, more equal, and more responsible. ‘Sustainability is a huge market, with corresponding massive interest and investment capital,’ says Christopher Grätz.

With the merger with Oneplanetcrowd, Invesdor has positioned itself as a leading European impact investing platform: Oneplanetcrowd has long pursued a targeted impact strategy, focusing exclusively on projects that have a clear impact on one of the 17 United Nations Sustainable Development Goals (SDGs).

In the meantime, the entire Invesdor Group has set the goal of presenting investors exclusively with projects that contribute to a sustainable world of the future. To achieve this, we have formulated two essential sustainability guidelines:

All Invesdor issuers and their projects undergo an ESG risk assessment before being listed.
For all projects, the impact on at least one of the mentioned SDGs is determined through measurable Key Performance Indicators (KPIs). The ‘Oneplanet’ label highlights outstanding projects.

We take these guidelines very seriously – they have the same priority for us as credit risk policy does for loans and investment policy does for equity projects.

ESG: Responsible in Three Areas

ESG is one of the aspects at the core of Invesdor’s guidelines for sustainable investing. The abbreviation stands for Environmental, Social, and Governance and refers to the three central factors for measuring the sustainability of an investment. Environmental criteria (represented by the ‘E’ in ESG) address how a company contributes to solving environmental issues (e.g., waste, pollution, greenhouse gases, deforestation, and climate change). Social criteria (the ‘S’ in ESG) relate to the treatment of employees and customers by the respective company (e.g., human capital management, diversity and equal opportunity, working conditions, health, and safety as well as misleading sales). Governance criteria (the ‘G’) examine how a company is managed (e.g., executive compensation, tax practices and strategy, corruption and bribery, as well as diversity and structure).

The growing importance of ESG in finance is based on the simple idea that companies deliver high returns when they create value for their stakeholders – employees, customers, suppliers, and society as a whole – and not just for the company’s owners.

How Invesdor Assesses ESG Risks

The ESG analysis can be complex. When considering ESG factors, it is not only about evaluating the products and services of a company but also its behavior, its supply chain, and other aspects related to its corporate governance. As part of our ESG risk assessment, we investigate whether the company has negative impacts on sustainability factors such as environmental, social, and labor issues, respect for human rights, and the fight against corruption and bribery. In addition, we assess whether a company is exposed to serious sustainability risks, meaning an ecological, social, or governance event or condition that could significantly impair the value of the investment if it were to occur.

The goal of the ESG risk analysis is to identify both risks and opportunities and thus uncover potential areas for improvement. At Invesdor, we firmly believe that a more forward-looking and dynamic approach is needed when evaluating ESG risks and opportunities. Furthermore, an ideal analysis should not only consider the latest ESG data but also the company’s strategy, overall impact, and evidence that it adheres to its promises and standards. It should also include a forward-looking perspective, so that investment decisions are not based solely on historical data.

The ESG risk assessment is a free analysis that Invesdor conducts for every new project that is to be placed on the platform. The goal of this assessment is to answer the following two questions:

Does the project harm the environment, society, and/or stakeholders?
Could the value of this project be jeopardized by ESG developments?

If the answer to either of these questions is ‘Yes,’ the project will not be included on the Invesdor platform.

The table below contains some examples for each of the ESG criteria:

ESG	Description	Example Criterion 1	Example Criterion 2
Environment	Impacts on the physical environment and the risks faced by a company and its stakeholders due to climate events. The EU taxonomy provides a comprehensive overview to clarify which investments are environmentally sustainable.	– Contributes to climate change and greenhouse gas emissions; Air pollution; Water and wastewater management. – Inefficient waste and hazardous substance management. – Negative impacts on biodiversity and ecosystems.	– The project and/or business model can be affected by the physical impacts of climate change, such as flooding or rising temperatures. – The project and/or business model can be hindered by stricter laws and regulations.
Social	Considers the social impacts and associated risks that arise from the actions of society, employees, customers, and the communities in which the company operates.	– Employees in the supply chain are underpaid and/or work in poor conditions – unequal treatment of employees. – There is no respect for the community and no contribution to the local economy.	– The business model is no longer viable if, for example, suppliers from low-wage countries can no longer be used.
Governance	Evaluates the timing and quality of decision-making, the governance structure, and the distribution of rights and responsibilities among different stakeholder groups to serve a positive societal impact and risk mitigation.	– Common standards of business ethics are not followed. – Management compensation creates perverse incentives. – The company’s structure adversely affects the position of investors.	– The way the supply chain is managed poses unforeseeable risks. – Data protection is not at the desired level, which harms patents.

The 6 environmental objectives of the EU, as defined in the Taxonomy Regulation, are:

Mitigation of climate change,
Adaptation to climate change,
Sustainable use and protection of water and marine resources,
Transition to a circular economy,
Prevention and reduction of environmental pollution, and
Protection and restoration of biodiversity and ecosystems.

Impact: Doing Good – and How Invesdor Measures It

The potential of companies or projects in terms of impact investing is also part of Invesdor’s sustainability guidelines. Impact investing means investing in something that measurably contributes to one of the goals for sustainable development, the aforementioned SDGs. It is a form of sustainable investing that goes beyond simply excluding companies or countries. With impact investing, investors achieve not only financial returns but also a positive sustainable impact. ‘Invesdor decided to use the SDGs as a framework for determining intended and realized impacts,’ explains Christopher Grätz. The SDGs serve as a blueprint for addressing the biggest societal challenges of our time, such as combating diseases (SDG 3) and renewable energy (SDG 7). Together, the SDGs form a roadmap for achieving peace and prosperity for people and the planet, now and in the future. ‘Invesdor only awards the impact label to companies in the financial sector that make a positive contribution to at least one of the SDGs,’ says the Invesdor CEO.

Where Invesdor Draws Red Lines in Terms of ESG and SDGs

To emphasize that Invesdor does not compromise in certain areas, we have identified specific services, products, and sectors that are under no circumstances acceptable for the platform and thus cross the red lines. As such no-gos, Invesdor excludes projects from companies that:

Are involved in the production, marketing, or sale of tobacco and cannabis products for recreational use.
Are involved in the gambling industry or provide services in this sector.
Manufacture weapons, specifically designed components for weapons, or provide weapons-related services. Companies involved in the production or sale of dual-use technologies. Dual-use technologies are subject to strict scrutiny, as their products must not be intended to inflict physical harm on humans or animals or contribute to such harm.
Have a high risk of using conflict minerals or those who mine and supply such minerals without making efforts to source conflict-free minerals. Invesdor also requires this from its suppliers.
Operate in the sex industry.
Conduct animal testing that is only acceptable for legitimate medical purposes, and Invesdor does not place companies that do not conduct carefully controlled animal testing based on the principles of ‘reduce, refine, replace.’
Use animal products or ingredients and do not have animal welfare policies and practices that go beyond legal requirements. We prefer companies that have clear goals for improving animal welfare and actively advocate for better animal welfare standards in the industry, as well as companies that offer plant-based alternatives for the production or use of animal products.
Do not contribute to sustainable fishing and aquaculture practices.
Are involved in the production and sale of fur and specialty leather for which animals are bred.
Cause extensive or repeated damage to biodiversity or are in businesses with a high potential risk of causing such damage without managing these risks.
Show no awareness of deforestation, do not practice sustainable forestry, and do not source and use responsible forestry products.
Are unaware of climate change and do not make credible efforts to eliminate their greenhouse gas emissions and find alternatives to non-reducible emissions as quickly as possible.
Are unaware of the dangers of using hazardous substances and do not contribute to the introduction, development, and promotion of less harmful alternatives.
Are involved in accounting irregularities or irregularities in compensation that raise significant ethical and moral concerns.
Offer excessive compensation and remuneration packages for directors that do not comply with local or international standards for best practices.
Are involved in irregularities related to corruption, bribery, or money laundering.
Engage in tax avoidance schemes that raise serious ethical or moral concerns and clearly violate local or international standards.
Are involved in violations of laws and regulations, codes of conduct, or conventions, unless there are indications of structural change within the company that lead to fundamental behavioral changes.

We believe that with the Invesdor investment guidelines, we can contribute to perhaps the most pressing issue of our time: the transition to a more sustainable, equitable, and responsible economy.

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