Sustainable investing is a fast growth stocks investment strategy that takes into account environmental, social, and governance (ESG) factors. Sustainable investors believe that these factors play a significant role in determining a company’s long-term success and impact on our world.
With sustainable investing, you can balance your portfolio with investments that align with the values that matter most to you.
What is Sustainable Investing
Sustainable investing is an approach to investing that considers environmental, social and governance factors in addition to financial performance. It is also known as socially responsible investing (SRI), ethical investing, environmental, social and corporate governance (ESG) or green investments.
In other words, it means that you’re doing your part to help the environment and the people who live on it. You can do this by buying stock in a company that is dedicated to sustainable practices or by purchasing a mutual fund, which has a professional money manager who will make sustainable choices for you.
Four Strategies For Sustainable Investing
Green Investment Strategy
This is a strategy that focuses on protecting the environment and reducing the negative impact of human activities on the environment. Green investments can be made through stocks, bonds, real estates or any other financial instruments.
There are several ways to invest for the sake of sustainability. One of the most popular is to focus on companies who have already adopted a green mindset or who have yet to make the switch from traditional fossil fuel-based energy to sustainable sources.
There are several green investment strategies, including choosing stocks based on environmental friendliness and choosing stocks based on the company’s ability to address environmental issues. Both of these strategies do have their risks.
However, if you choose stocks based on their ability to address environmental issues, for example, you’ll be investing in companies that could potentially lose money if they’re not able to meet certain requirements.
Green Investment Strategy allows investors to diversify as well as control their portfolio by adding more sustainable energy sources and goods while also limiting their exposure to unsustainable products. It’s important to note that it’s possible that some green companies might go out of business due to their inability to compete with other companies using traditional energy sources.
ESG Investing
ESG Investing (Environmental, Social, and Governance) involves researching the environmental, social, and governance factors of the companies that you’re thinking about investing in. It’s relatively simple to invest in a sustainable way.
If you choose companies that support the environment, treat their employees well, don’t pollute the environment, etc., then you’re investing in a sustainable way regardless of what happens to the company’s stocks. There are many different ways to be socially conscious with our money, but one way that can be very impactful is choosing companies who are doing their part to help in spreading plastic awareness that causes plastic pollution in the ocean.
When companies do well financially, they tend to treat their employees better because they know that an unhappy employee is going to be less productive at work. On the other hand, if employee satisfaction declines over time due to bad management decisions or financial struggles, then employee productivity will also decline over time. You can make money using this strategy because companies that do well often see their stocks rise as a result of demand for their products/services increasing over time.
Ethical or Negative Exclusions
This is a strategy where you decide what criteria you want to use to determine which companies will be included in your portfolio. For example, you may have a list of companies that have committed egregious crimes against human rights, or a list of companies that support research on genetically modified organisms (GMOs). You can then exclude those companies from your portfolio.
The idea behind this approach is to avoid companies that cause or contribute to harmful or immoral practices. In other words, you want to invest in companies that make products that are good for people and good for the environment. That might mean avoiding companies that make weapons or cigarettes, or it might mean looking for companies that manufacture renewable energy sources—or, even better, manufacturers of solar panels and wind turbines.
By investing in these companies you’re also helping to ensure their success, which means there will be more companies making more clean energy in the future.
Positive Inclusionary/Impact Investing
This is where you include companies that meet the criteria that align with your values and beliefs. You build a list of criteria like fair trade, health and wellness, support for the arts, etc., and then you look for companies that match those criteria and include them in your portfolio.
On the other hand, some sustainable investors choose to invest in companies who are doing things right by their employees, customers and the planet—that is, they specifically seek out business practices and products that improve lives and reduce harm to the environment.
For example, if you support fair trade products, you’ll want to invest in business practices that cultivate a sustainable supply chain with fair wages for workers and environmentally sound manufacturing processes.
The Benefits Of Sustainable Investing
People who invest in sustainable companies, or businesses whose practices are based on principles of social and environmental responsibility, are reaping benefits in their portfolios. The approach of sustainable investing makes sense for a variety of reasons.
- It provides investors with opportunities to get involved in the management decisions of companies, which can have a profound impact on their success.
- In addition, it gives investors a chance to support these companies as they continue to grow and expand.
- Those who invest in sustainable companies tend to be financially rewarded for this involvement. They enjoy the satisfaction that comes from doing business in an environmentally responsible manner.
- People who invest in sustainable companies are also making a responsible decision for future generations by setting an example for corporate behavior today.
