What Is Sustainable Investing? Guide

Sustainable investing is an investment strategy that involves investing in companies that seek to combat climate change, environmental destruction and promote corporate responsibility. By directing capital to such companies, investors acknowledge that companies striving to solve some of the world’s biggest challenges are well positioned to grow and generate significant returns.

Investors are increasingly investing and supporting sustainable companies as well as green initiatives with the trend showing no signs of slowing down. The trend also appears to have gained momentum as more and more investors come to terms with the effects of climate change and environmental damage.

In the past, most investors viewed sustainable investing as activist investing designed to make a statement. Fast forward, things have changed amidst increased awareness of climate change impact. The mode of investing has also gained traction thanks to favorable returns generated so far. Currently, more than $20 trillion is invested in socially responsible and sustainable ways.

 Getting Started In Sustainable Investing

 Focus on Sustainable Funds

If you are new to sustainable investing, the best way to get a head start is to focus on socially responsible and socially conscious investment funds. These funds are best known as environmental social and governance funds as they evaluate company’s social, environmental, and governance standards.

Sustainable funds can be found in the U.S Forum for Sustainable investing. While some of the funds in the listing have high minimum investment requirements of as much as $1 million, others accept as little as $1,000.

 Focus on Diversified Funds

When it comes to sustainable investing, the idea is to invest in highly diversified sustainable funds. Diversified funds allow investors to spread the risk over multiple securities, thereby avoiding the risk of an investment portfolio taking a hit on one asset underperforming. In this case, one can invest in funds that invest in an array of renewable energy companies instead of focusing on one company.

Funds’ Performance

When it comes to sustainable investing, investors tend to focus solely on companies and funds that support economic, social, and environmental issues that matter to them. However, that should not be all. Investments also need to grow, as that is the ultimate goal of any investment.

Conversely, investors should first screen funds for performance and then analyze their environmental, social, and governance criteria. This way, one is always sure to end up with funds with strong returns as well as solid ESG ratings.

Ruchi Gupta

Ruchi Gupta covers various beats from finance to technology and from lifestyle to hobbies. She has an MBA in Finance. Ruchi enjoys writing on celebrities and political news. She likes traveling and exploring places.

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