Sustainable investing in Switzerland: A starter guide

Most likely, you are already trying to make the world a better place – do you opt for the bike instead of the car if possible? Are you bringing your own tote bag when going shopping? Do you study labels on food items to make sure the product you try to purchase hasn’t travelled to more countries than you have been to in your life? Are you scanning your cosmetic products to sort out sun screens with micro-plastic in there? 🌱

All these small steps are important. But how can you transfer your life’s values to your investments? There are a few options if you’d like to make sure the money doesn’t get put to work at weapon manufacturers or companies that are not committed to achieving climate goals.

Sustainable investing options in Switzerland

If you want to invest sustainably, there are essentially three different options in Switzerland that you can consider.

1. You invest in individual stocks yourself
2. You have a sustainable stock portfolio created for you
3. You invest with Selma Finance and receive a broadly diversified sustainable ETF portfolio

1. Picking Sustainable Stocks: A Balancing Act

You open a broker account, excited to invest in companies that align with your values. The dream? Make the world a better place and grow your wealth for the future. Sounds like a win-win, right? But hold on—there's no magic formula. Picking sustainable companies yourself is a bit of a gamble. How do you know if a company is doing good now and will keep doing good later?

Add to that the sheer variety of industries, from solar energy to meat substitutes and sustainable mobility. Finding that sweet spot between doing good and doing well financially? It's a balancing act, no doubt about it.

Pros ✅

• High level of personalization: You get to pick where your money goes.
• Low costs: If you buy once and hold, the costs are minimal.

Cons ❌

• Time-consuming: Selecting and monitoring companies takes time and effort.
• Expertise required: You need a certain level of know-how to make smart decisions.
• Transaction costs: Depending on your trading activity, costs can add up.
• Diversification: It's challenging to create a diversified portfolio with individual stocks alone.

2. Get a portfolio of sustainable stocks

Another approach to sustainable investing is through platforms like Inyova, which specialize in creating portfolios filled with a variety of sustainable investments.

Choosing a full portfolio of sustainable stocks through such platforms can reduce the risks associated with picking individual companies, as we discussed earlier. These portfolios usually include 20-30 different stocks and bonds, and you have the option to personalize them by selecting themes like renewable energy, clean water, quality education, or Swiss champions.

However, this personalized approach comes with a cost. Inyova charges an annual management fee of 1.2% for investments below 50'000 CHF, making it one of the more expensive online investment platforms in Switzerland.

Additionally, a portfolio of 20-40 stocks and bonds isn't exactly extensive. If you focus on specific industries or themes, you could introduce industry-specific risks into your portfolio. Therefore, it's essential to diversify your investments both globally and across various sectors to take advantage of global market growth—all while maintaining a sustainable investment strategy.

Pros ✅

• Limited know-how required
• Easy to use

Cons ❌

• High costs: With a 1.2% annual fee, Inyova is among the more expensive options.
• Limited diversification: The portfolio isn't as broad as one might desire.
• Industry-specific risks: Specialized focus can introduce additional risks.

3. Personalised sustainable ETF investment plan

Your third option for investing sustainably is through an ETF investment plan. Known as Exchange Traded Funds, ETFs offer a cost-efficient and diversified investment strategy.

But how can you ensure your investments are truly sustainable? Selma Finance has got you covered.

What are sustainable ETFs?

ETFs are funds that hold a variety of assets like stocks, bonds, and commodities. Their goal is to mirror the performance of a specific index. This means you can invest in hundreds or even thousands of companies at once. The upside? Your money is broadly diversified, and the costs are minimal. But how can you be sure you're only investing in "sustainable" companies?

Sustainability with Selma Finance

Selma Finance allows you to create a customized ETF investment plan. With just one click, you can opt for a sustainable investment strategy. Selma focuses on ESG and SRI ETFs, which are selected based on strict environmental, social, and governance criteria. Companies that don't meet these stringent standards are filtered out of your portfolio. So, you're still investing broadly and cost-effectively, but only in companies that meet rigorous sustainability criteria.

Why ESG and SRI Criteria?

Selma has chosen ESG and SRI criteria to offer high-quality, sustainable investment products. The aim is to exclude "bad" companies and promote those that have a positive impact on the environment and society.

• ESG: Stands for Environment, Social, and Governance. ESG funds exclude companies involved in sectors like coal and oil extraction, nuclear weapons, and tobacco.
• SRI: Socially Responsible Investment rating is even stricter and excludes companies in controversial business fields.

Advantages of Selma's Strategy ✅

• Global Diversification: Your investments are spread worldwide.
• Personalization: You get an investment plan tailored to you.
• Risk Minimization: The broad diversification of your investments minimizes your risk without compromising on returns.
• Cost-Effective: Selma's fee ranges between 0.47%-0.68%.

How do you turn sustainable investing on at Selma? 

For your investment account, you have to switch your plan on the Investments > Plan page

It doesn’t matter if you haven’t opened an account yet or if you are an existing investor already. As an existing investor, should you switch to another strategy, your current investments will be adjusted to your new strategy. This might involve some one-time indirect cost due to sales and purchases. You can see details here.

You can have a look at the investment products used for the sustainable plan by clicking on the “Advanced” view before starting to invest.

When opening your pillar 3a account with Selma, you don’t have to choose between a “normal” and a “sustainable” option, because the pillar 3a investments are already considered sustainable.

Conclusion: The Best Choice for Sustainable Investing

In today's world, there are various paths you can take to invest your money sustainably. Whether you opt for individual stocks, create a portfolio with the help of a robo-advisor like Inyova, or choose a diversified ETF investment plan with Selma Finance, each method has its own set of pros and cons.

Individual stocks offer a high level of personalization but come with the drawbacks of being time-consuming and requiring in-depth expertise. Additionally, the risk is high if your investments are not well-diversified.

Robo-advisors simplify the process of selecting sustainable investments but generally come at a higher cost and offer limited diversification.

In contrast, Selma Finance provides a balanced mix of diversification, cost, and sustainability. With Selma, you get a customized, sustainable ETF portfolio tailored to your needs and risk tolerance. The fees are moderate, and the wide range of ESG and SRI ETFs ensures that your investments are both ethically and financially sound.