Sustainable Investing

The European financial regulation MiFID II has required financial advisors in the EU since 2026 to systematically collect clients' sustainability preferences and offer corresponding products. Distributors of financial instruments must ensure that sold financial products match the individual sustainability wishes of their clients – a significant tightening of advisory duties in portfolio management.

Stricter Regulation through MiFID II

The Markets in Financial Instruments Directive (MiFID II) has been supplemented by amendments to the delegated regulation. This integration of sustainability preferences into advisory and portfolio management processes means in practice: financial products must contain a minimum share of sustainable instruments or take into account material negative impacts on sustainability factors.

These material negative impacts are referred to as Principal Adverse Impacts (PAI) – a term from the Sustainable Finance Disclosure Regulation (SFDR). PAI capture measurable negative effects of investment decisions on environment, social and governance. The SFDR defines the sustainability standards on which MiFID II is based.

Sustainable ETFs as Central Investment Form

Sustainable equity ETFs (Exchange Traded Funds) are becoming the core instrument for private investors who want to invest cost-effectively and diversified in companies with defined sustainability standards. An ETF is an exchange-traded index fund that passively replicates a specific index – for example, a sustainability index – and can be traded continuously like a share.

A current analysis covers 173 tested sustainable ETFs (as of February 2026, according to available market overview). The tests identify both the most sustainable products and those with the best financial performance. Selecting an appropriate sustainable index is the essential step in the investment decision process.

Stiftung Warentest Awards Top Marks

Stiftung Warentest has examined sustainable funds and ETFs and awards the top grade in the highest category to a total of eleven products. These independent tests provide private investors with guidance in a growing market segment that includes, in addition to ETFs, actively managed sustainable funds.

Actively managed funds differ from passive ETFs in that fund managers actively select and rebalance securities. This typically results in higher costs but offers additional selection options according to sustainability criteria.

FNG Sustainability Profiles Provide Transparency

The Forum for Sustainable Investment (FNG) has offered investors since 2012 with its FNG Sustainability Profiles an overview of sustainable investment strategies and relevant key figures of investment funds. According to FNG notification of March 25, 2026, these profiles represent an established information source for the classification of sustainable funds.

The profiles systematically capture which sustainability approaches a fund pursues – such as exclusion criteria, best-in-class approaches, or impact investing strategies. Exclusion criteria exclude certain industries such as weapons or coal. Best-in-class selects the most sustainable companies in a sector. Impact investing aims for measurable positive impact.

What Investors Should Consider

Selecting a sustainable ETF or fund first requires clarifying your own sustainability preferences. Investors should define which criteria are important to them: environmental aspects such as CO₂ reduction, social factors such as fair working conditions, or governance issues such as corporate ethics.

Costs play a central role. Sustainable ETFs typically have a total expense ratio (TER) of between 0.10 and 0.50 percent annually – significantly cheaper than actively managed funds with costs often exceeding 1.0 percent. The TER includes management and operating costs but not transaction costs.

The transparency of the underlying index is another decision criterion. Investors should be able to understand according to which criteria companies are included in or excluded from the index. Index providers such as MSCI, FTSE Russell or Solactive publish methodology documents that describe these selection processes.

Market Development in the DACH Region

The German-speaking region is seeing growing interest in sustainable investments. The regulatory requirements through MiFID II and SFDR accelerate this development, as financial advisors must actively address sustainability options. This increases the visibility of sustainable products in the advisory conversation.

Investors in Switzerland, Germany and Austria benefit from a broad range of exchange-traded sustainable ETFs available at major trading venues such as SIX Swiss Exchange, Xetra or Wiener Börse. Trading currencies include Swiss francs, euros and partially US dollars.