Sustainability-oriented investors should expect to find some unexpected holdings in their portfolio when they choose products with a swap-based (synthetic) index replication approach. While index products with a full replication approach hold normally only the constituents of their respective index, the portfolio of a synthetic product is built with a swap that replicates the risk/return profile of the respective index and the so-called collateral. The securities held as collateral are often chosen based on their liquidity and transaction costs, as this helps to minimize the costs of managing the product. If the securities for the collateral are not chosen with

The EU green taxonomy is one of the main pillars of the sustainable investing framework in the EU. The purpose of the taxonomy is to define which business activities and sectors can be considered as sustainable. That said, the current proposal to classify nuclear and gas as green energy sources—since they can be seen as transitional technologies to bridge the gap between the current and future energy demand and the lack of the availability of renewable energy sources for the time being—is putting the credibility of the EU action plan for financing sustainable growth under scrutiny. The possible inclusion of

The EU action plan for financing sustainable growth was set up to boost the role of the finance industry in achieving a well-performing economy that delivers on environmental and social goals defined in the EU’s 2030 targets, which are outlined in the so-called Paris Agreement. Since this effort needs an expected investment of around €180 billion a year, it is clear that the EU Commission needs to connect the finance industry with the specific needs of these goals. The first paragraph of the chapter reorienting capital flows toward a more sustainable economy within the renewed sustainable finance strategy and implementation