[Glossary](https://pecuvo.eu/en/glossary/) · Investing # Sustainable finance **In short:** sustainable finance means taking environmental, social and governance considerations into account when making investment decisions, as the European Commission describes it. **Simply put:** EU law defines a "sustainable investment" (SFDR, Art. 2(17)): an investment in an activity that contributes to an environmental or social objective, does no significant harm to other such objectives, and where the companies follow good governance. Two questions are kept apart: how the world affects the investment (sustainability risk) and how the investment affects the world (sustainability factors). **Example:** A "European green bond" issue must direct its proceeds in line with the EU taxonomy, with a factsheet and an external review. But its risks — credit, interest rate, liquidity — remain those of any bond. **Watch out:** it cannot be said in general that sustainable investments carry lower risk, or higher or lower returns. **Source:** European Commission — https://finance.ec.europa.eu/sustainable-finance/overview-sustainable-finance_en; Regulation (EU) 2019/2088 — http://data.europa.eu/eli/reg/2019/2088/oj ## In depth in the modules - [Module 29](https://pecuvo.eu/en/modules/sustainable-finance/) - [Module 24](https://pecuvo.eu/en/modules/investing-the-basics/) - [Module 10](https://pecuvo.eu/en/modules/the-five-cash-flows/) ## Related terms - [ESG](https://pecuvo.eu/en/glossary/esg/) - [Greenwashing](https://pecuvo.eu/en/glossary/greenwashing/) - [Bond](https://pecuvo.eu/en/glossary/bond/) - [Investment fund](https://pecuvo.eu/en/glossary/investment-fund/) - [Home energy efficiency](https://pecuvo.eu/en/glossary/home-energy-efficiency/)