Aligning Profit With Purpose
Sustainable investing continues to gain ground, with record funds flowing into sustainable funds in the first half of 2020 and growing recognition that they offer competitive returns with lower risks. New products like Ecoligo, Sagefund and Mattrvest could bring personalized values-based investing mainstream.
We’ve all experienced the dangers of prioritizing profits over mission. Now is the time to change that dynamic.
Impact Investing
Many of the world’s biggest social issues cannot be solved solely through philanthropy or government action, so investors can make an impactful difference by reallocating capital into companies aligned with their values. Unfortunately, however, achieving both positive impact and market returns simultaneously is often challenging.
Sustainable investing strategies offered to investors range from negative screening, positive screening, ESG integration, best-in-class selection and thematic investing – each designed to enhance corporate sustainability and performance by prioritizing what matters.
Many of these strategies take a “triple bottom line” approach, prioritizing social value creation, environmental impact reduction and financial gains in order to benefit all stakeholders. Others focus on particular issues like gender equality or clean water; investors can work to influence and encourage corporations to adopt sustainable practices by filing shareholder resolutions or engaging directly with corporations directly; there are even ETFs which track specific sustainable themes or topics.
Socially Responsible Investing
As sustainable investing becomes an increasing priority for investors, they are searching for strategies that combine financial goals with environmental and social impact. One such strategy is negative screening which removes companies that produce harmful products such as tobacco, alcohol, fast food, weapons or fossil fuels that conflicts with an investor’s nonfinancial values or ethics from a portfolio.
Some investors opt for positive screens, which identify companies that prioritize renewable energy, carbon neutral business practices or other initiatives with an eye toward improving corporate behavior while helping alleviate climate crisis by diverting resources away from companies that continue to emit greenhouse gases. These investments not only promote better corporate behavior but also help reduce greenhouse gas emissions by taking resources away from companies which continue to emit them.
If you prefer outsourcing investment management, various mutual funds exist that incorporate ESG criteria into their management strategy. Furthermore, data sources like As You Sow enable investors to easily plug in a fund ticker and review its performance across an array of ESG metrics (for instance fossil fuel use or gender equality).
ESG Investing
ESG investing refers to any strategy that considers environmental, social and governance considerations when making investment decisions. Investors may include or exclude certain investments as part of an ESG approach to investing, while engaging companies through shareholder resolutions or other forms of activism.
Businesses that prioritize sustainability often find that doing so saves them money in the long run. Companies that conserve natural resources and reduce their carbon footprint save money through reduced energy expenses, reduced water usage, or the elimination of waste. Apple stands as an excellent example: by switching to renewable energy it managed to cut emissions while simultaneously becoming carbon neutral.
Investors who embrace ESG strategies may be driven by personal values or goals, the needs of clients or constituents, or an ambition for social or environmental change. Furthermore, such investors often seek a blend of financial and non-financial returns in their investments – they can create ESG portfolios by selecting stocks, mutual funds or ETFs which meet specific criteria that satisfy them.
Green Investing
Green investments support companies working toward environmental change through activities like reducing pollution, employing renewable energy sources, conserving natural resources, and adopting environmentally-conscious business practices. Green investments may take various forms such as direct investments into companies or mutual funds or electronically traded funds that offer green investing options; private equity firms, hedge funds and individuals may also use such vehicles to raise capital.
Many investors opt to make their money go further with sustainable investments such as green stocks or funds that do not invest in fossil fuels, thus fulfilling personal values while meeting institutional goals.
Investors can incorporate ESG factors into their investments in various ways, such as negative screening, best-in-class selection, ESG integration, thematic investing or impact investing. No matter which strategy they employ, their goal should be to produce both financial returns and tangible social or environmental returns from sustainable investments – something studies have proven.
