The flow of our money. Circular economy.

Social awareness has also reached finance, posing new challenges when it comes to managing investors' savings.

Not many years ago, the main motivation when hiring a financial service was the Profitability it offered. 

With the arrival of the crisis, many things changed. The volatility to which many investments were subject and the lack of information that many clients had about it became apparent; it was then that the risk factor began to be taken into account, becoming demanded and mandatory information. 

Common sense and the required good practices mark a new behavior of the traditional investor and financial entities under the profitability-risk binomial. This would be the first step of the transformation that was looming.

A new generation of savers, much more digitalized, informed, and socially conscious, introduce new variables when making a decision. Now we talk about profitability-risk-sustainability and ethics, ordered according to the weight of each one.

-Economic aspect remains a priority as it is inherent to the act of investing, but it has ceased to be the only one.

 Leaving aside from this analysis a professional profile, the reasons that lead us to seek profitability can be very different and vary according to the age and circumstances of each individual. Thus, we can find those who seek to maintain the value of their money by counteracting the effects of inflation, those who seek a profit to indulge themselves with a small luxury, or those who need to ensure a cushion for emergencies or for the future.

-Similarly, age and circumstances, both individual and economic, condition the level of risk that people are willing to take. Normally, we talk about three different profiles, classifying the products based on them into high, medium, or low risk. Current regulations have stepped up their game, and nowadays, a suitability test for the client is mandatory when providing financial advice.

But, what are sustainable, circular, or ethical finances. 

-Sustainability implies, on the one hand, a certain feedback of the economic system itself, moving away from the usual linear flow of money that seeks maximum speculative profit towards a circular flow where money returns to the real economy, promoting its growth. In this way, all parties benefit, and a sustainable model is achieved where monetary returns are also measured in social terms.

-But it also implies a flow of funds towards projects that promote ethical and environmental values, contributing to their development, where people become aware of the destination of their funds.

In this sense, the European Union has developed an ACTION PLAN ON SUSTAINABLE FINANCE, which we can see summarized in this scheme published on "mercadosdemedioambiente.com," which allows us to approach the basic aspects of it.

 Ultimately, it is not the financial system that has changed society but rather the opposite, it is society that has transformed the way of understanding finance, turning them into a potentially very hopeful factor for change.