Sustainable investing. What is it?
Sustainable investing is a growing trend in the world of finance. It’s an approach to investing that focuses on long-term goals rather than just making money. This means that companies will need to consider factors like the environment, workers, and consumers when creating products and services.
Sustainable investing is one of the most powerful and impactful investing trends that people are looking into to help make a positive change. It involves tackling climate change, and animal and human rights.
It gives you the option to invest with intention based on your ethics and values, which makes investing that much more personal.
Why is sustainable investing important?
With the increase of people being aware of the environment and social impacts that a lot of companies have on the planet, it is no wonder why more individuals are looking into a more socially responsible way of investing their money.
We are constantly reminded of unethical practices that certain businesses get away with. By investing in companies that put both their clients/consumers and the planet first, you can help nations, ethically driven businesses, and societies to grow, develop, and initiate positive change.
How does sustainable investing benefit you?
As an investor, you are more likely to know how and where your investment is going. When you choose to invest in companies that are more aligned with your values, you become part of the solution and help make positive change.
According to the Global Sustainable Investment Alliance’s 2021 Global Sustainable Investment Review, at the start of 2020, sustainable investment reached $35.3 trillion in five major markets (the U.S, Canada, Europe, Japan, and Australasia)—15% increase in the past two years (2018-2020) and 55% increase in the past four years (2016-2020).
The main question clients always ask is, is sustainable investment profitable?
The worry that some investors have about sustainable investing is the notion of a trade-off between the planet and profit. The reality is it’s not about whether we might make less money by considering the environment, for us, it’s about how we can help you make more money by finding companies that are being smart about the environment.
These are companies that can and are creating value for all stakeholders. Such companies are more likely to succeed in the long term and deliver profitable financial returns.
The four main approaches to sustainable investing.
- Exclusionary screening
- Environmental social and governmental integration
- Thematic investing
- Impact investing
This means not investing in companies or sectors that don’t align with your ethics and values. For instance, we will help discuss with you which specific companies or sectors you would like us to avoid. Our goal is to help you invest in businesses that you want to put your money towards.
Environmental, social, and governance integration or ESG
ESG Integration means incorporating environmental, social, and governmental issues into your analysis when you decide whether or not to make an investment. You might do this because it’s important to your personal value system, you believe these companies will do better financially over time, or a combination of the two.
Recent data has shown that companies with highly-rated ESG practices have held up just as well, and as a whole have even outperformed the general global investment opportunity set. During the first of the pandemic, large funds with ESG criteria outperformed the broader market according to a report published by S&P Global.
Thematic investing allows you to invest in companies and projects that tackle specific issues that are meaningful to you. For example, say you are interested in green energy or development around creating access to clean water, especially in the poorer regions around the world.
It’s about putting your money to work on businesses or projects with a focused mission to create and generate positive social, environmental, and values-based impacts.
The four main approaches are designed to generate a positive gain on your investment.
How can we help you?
When searching for companies that are aligned with your values we consider these three things.
What impact does the company have on the environment?
- climate change
- air and water pollution
- waste management
- energy efficiency
- water shortage
What positive aspects does the company have on its employees, their clients/consumers, and society?
- Human rights
- Mental and physical health
- Gender equality
- Data privacy
How is the company governed or managed?
- board structure
- company ownership
- financial reporting
- business ethics and culture
- executive remuneration
Considering sustainable investing?
Here is how we can help you get started.
- Ready-made sustainable portfolios
- Build your own portfolio.
We all have our individual set of values. There are no reasons why we cannot reflect those values in something as personal and profitable as our finances. Whether that is to strengthen your portfolios, invest in causes that you care about or avoid the ones that you deemed unethical. It is always worth considering how you can implement a sustainable investing strategy in your portfolio.
Get in touch today to learn how we can help you