One thing we often enjoy discussing with other business professionals, portfolio managers, and seasoned investors is sustainable investing. Sustainable investing helps us build a better world by encouraging positive social and environmental change. It also helps us build better financial futures as well – by encouraging us to focus on building businesses that can weather wider social and environmental challenges.
What Is Sustainable Investing?
Sustainable investing, also known as socially responsible investing, is when an individual or a company strongly considers environmental, social, and corporate governance factors before allocating money to a business or a project.
Why Is Sustainable Investing Important?
Sustainable investing encourages companies to be more transparent with stakeholders when it comes to their activities. It may even encourage them to consider changing their practices and ways of doing business. It is vital to notice that the recent focus on sustainable investing has led to a substantial increase in money invested in ESG companies.
When looking at sustainable investing, you can consider it as a way of aligning your core values with those of the companies in which you are considering investing. It is essential to add here that sustainable investing is generally considered a long-term strategy, and not necessarily something that will help you achieve your short-term goals. As with any investment, you need to give your investment the time to grow and to contribute to your long-term wealth.
What Makes A Company Or Project Sustainable?
Now, the next thing to consider is what makes a company or a project sustainable and what are the most important factors to keep in mind.
Let`s first get started by briefly examining the factors that comprise sustainable investing or the so called ESG factors:
1 – Environmental Factors
This factor looks at the impact that a company or a project has on the environment. It takes into account the technology a company uses, what a company does to reduce its carbon footprint, and how well it manages its water, waste, and energy consumption.
2. – Social Factors
This factor looks at what impact a company or a fund has on society. It addresses issues such as racial diversity, human rights, health and safety, and community engagement.
3 – Corporate Governance
This factor deals with how a company is managed or governed. It looks at the actions and policies a company implements in order for it to achieve what it has set out to achieve.
With this in mind, if we are considering investing in a company, then we need to assess whether that company has ‘green’ policies, if they deliver on their promises, and if their actions are in line with their goals.
If you don’t have time to carry out your own analysis and research, you can also leave this in the hands of a professional portfolio management firm. Their analysts will do the research for you and provide you with a comprehensive list of ESG projects and companies to invest in. Alternatively, you can look into less tailored solutions and choose one of their ready-made social investing strategies.
Sustainable investing doesn’t mean that you need to compromise on returns. You simply need to focus on finding the right ESG investment solutions. There are many providers that can help you invest in long-term socially responsible companies, and enable you to achieve substantial financial gains without compromising your values. For more information about investing, visit our blog.
Risk Warning: The information in this article is presented for general information and shall be treated as a marketing communication only. This analysis is not a recommendation to sell or buy any instrument. Investing in financial instruments involves a high degree of risk and may not be suitable for all investors. Trading in financial instruments can result in both an increase and a decrease in capital.