Sustainable Investing: What is it? Why is it important?

Investment / ESG Investing

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 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 US, Canada, Europe, Japan, and Australasia)—15% increase in the past two years (2018-2020) and 55% increase in the past four years (2016-2020).

What is sustainable investment

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.

What is sustainable investing by Consilium IFA

An article written by Bloomberg UK reported a set record in 2021 for sustainable investing. The article shows record-breaking fund inflows from investors who are ready to invest their money in companies that are working towards a sustainable future.

The four main approaches to sustainable investing.

  1. Exclusionary screening
  2. Environmental social and governmental integration
  3. Thematic investing
  4. Impact investing

Exclusionary screening

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

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.

Impact investing

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?

ESG - Why is it important

When searching for companies that are aligned with your values we consider these three things.

  1. Environmental 

What impact does the company have on the environment?

For example:

  • climate change
  • air and water pollution
  • waste management
  • energy efficiency
  • water shortage

2. Social 

What positive aspects does the company have on its employees, their clients/consumers, and society?

For example:

  • Human rights
  • Mental and physical health
  • Gender equality
  • Data privacy

3. Governance

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.

  1. Ready-made sustainable portfolios
  2. Build your own portfolio.

To conclude

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

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Author Info

Graham Bond
Graham Bond
Financial Adviser - Business Owner

With 35+ years in financial services, Graham specialises in retirement planning, investment strategies, and tax planning. His expertise ensures clients secure their financial futures through tailored advice and strategic planning.

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