When it comes to sustainable and responsible investing, the conversation too often stays vague, and for those outside the sector it is easy to get confused. Does a pension fund or an asset management company decide to invest responsibly when it excludes arms manufacturers from its portfolio? Or when it buys shares in a solar panel manufacturer? Eurosif (the European Sustainable Investment Forum) has brought some clarity, publishing the European SRI Study in 2012, in which seven strategies for responsible investing are identified. It is worth noting that these approaches are not mutually exclusive: a fund may choose to follow two or more of these criteria in combination.

1. Thematic investments

Those who choose this strategy (which in Europe, according to the latest Eurosif report published in 2014, is still the "Cinderella" of approaches) invest their capital directly in areas linked to sustainability: energy efficiency, health, tackling climate change, and so on.

2. Best-in-class investment

To invest responsibly in this case one does not simply exclude the "bad actors", but goes a step further: companies within a sector are analysed on the basis of their attention to environmental, social and governance (ESG) issues, and those with the best performance are selected.

3. Compliance with international norms and standards

The choice is made to invest only in companies and states that comply with certain international norms and treaties, such as the conventions of the UN or its agencies (Unicef, ILO, UNEP).

4. Exclusions

This approach – which accounts for 41 per cent of assets under management in Europe, representing a volume of €6,900 billion in 2014 – consists of excluding from the universe of possible investments all companies operating in sectors deemed inconsistent with one's own ethics. As a rule, responsible investing means cutting out the worlds of arms, pornography, tobacco and gambling, but some investors have also chosen to say no to animal testing, GMOs, and nuclear energy.

5. Integration of ESG considerations into financial analysis

Asset managers broaden the scope of traditional financial analysis by also incorporating environmental, social and governance variables. This means that thinking in watertight compartments — with financial performance on one side and respect for workers' rights, the environment and so on on the other — is no longer the approach: instead, ESG considerations play a fully legitimate role in investment decisions and in expected financial returns.

6. Engagement

This is the most complex strategy, because it goes beyond simply choosing where to allocate investments: one commits to actively making one's voice heard. The term soft engagement refers to when the investor enters into dialogue with a company's management, while hard engagement refers to the exercise of voting rights at shareholder meetings when issues that are socially and environmentally sensitive are at stake. In Europe, engagement grew by as much as 86 per cent between 2011 and 2013, reaching €3,300 billion.

7. Impact investing

Investment is made in companies, funds and organisations with the stated intention of generating a positive environmental and social impact, and not merely of securing a financial return: falling into this category are investments in social enterprises, social housing or microcredit institutions. This approach should not be confused with philanthropy, which by contrast is a non-repayable grant. In Europe, impact investing is making great strides, reaching €20 billion in 2013: the Netherlands and Switzerland lead the way.