Sustainable investing has become increasingly popular in the last few years. A US Sustainable Investment Forum (SIF) Foundation report revealed that $8.4 trillion in US-domiciled assets under management (AUM) fell under sustainable investing as of the end of 2021.
What is Sustainable Investing?
Sustainable investing considers environmental, social, and corporate governance (ESG) criteria in investment decisions and portfolio construction. Sustainable investors seek a return on their investments while supporting and contributing to positive, long-term environmental and social value.
Sustainable investing is also referred to as “ethical investing,” “mission-related investing,” “socially responsible investing,” or “values-based investing,” among other terms. Essentially, it aligns your personal values and beliefs with your investment choices. A few examples of ESG criteria used to qualify a sustainable investment are clean technology, anti-corruption policies, human rights, and water conservation.
Sustainable investors are not confined to a specific type of person or group. It is undertaken by everyone from the average retail investor to ultra-high-net worth individuals to large institutions such as universities, corporations, and nonprofit organizations.
How Do You Become a Sustainable Investor?
1. Educate yourself on sustainable investing. There are numerous resources online to learn more. This article from The Conversation is a good place to start.
2. Determine the values that are most important to you. Are you most concerned with green transportation and clean air or corporate ethics and diversity?
3. Conduct research to identify companies that align with your values. You can find corporate ESG ratings on sustainalytics.com or MSCI.com. If you plan to invest directly in specific companies, this is an important step.
4. Speak with an advisor to learn how you can incorporate sustainable companies into your investment portfolio. There are investment products that make it simple for you to do.
Lastly, sustainable investing doesn’t mean accepting a lower investment return; the financial performance has been comparable to conventional investing. Plus, you have the potential to earn more than money with sustainable investing, such as a sense of control, pride, or peace of mind.
SOURCES:
Sustainable Investment Forum, “Sustainable Investing Basics,” https://www.ussif.org/sribasics Harvard Business School Online, “What is Sustainable Investing?” https://online.hbs.edu/blog/post/sustainable-investing
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