Chapter 08 · Finance, data & evidenceSustainable Finance & Investment
Best-in-class
Definition
Best-in-class is an investment approach that favours issuers or companies with stronger sustainability performance relative to peers in the same sector or category.
References
This reference provides supporting context for how “Best-in-class” is defined and used.
Overview
What it means in practice
Best-in-class should be read as a sustainable-finance term. Its meaning depends on the instrument, mandate, strategy, disclosure rules and evidence of use or outcome.
In practice, users should state the boundary, method, instrument and evidence. That keeps best-in-class specific enough for review without turning it into a broader claim.
Why it matters
Best-in-class matters because finance labels can shape capital allocation and public claims. Clear wording helps distinguish strategy, eligibility, proceeds, targets and real-world outcomes.
Common misconception
A common error is to treat Best-in-class as a single investment philosophy. The stronger approach is to state the objective, method, exclusions, stewardship approach and evidence.
Review questions
What instrument, boundary or method gives the term meaning? What evidence supports it? What limitation would change how a reader interprets the claim?
How it is used
In professional practice, “Best-in-class” helps investors, lenders, analysts, data providers and sustainability teams describe or assess an investment approach that favours issuers or companies with stronger sustainability performance relative to peers in the same sector or category. It is commonly encountered in capital allocation, risk assessment, measurement, valuation, due diligence and performance analysis.
A credible application identifies the calculation method, data provenance, assumptions, boundary and decision purpose.