Sustainable investing is arguably one of the most important movements of our time.
The basic premise behind sustainable investing is to prioritize investments that maintain – or improve – environmental quality and social welfare, while still earning a financial return.
This type of investing has become more popular in recent years, as people are becoming increasingly aware of the importance of sustainability.
In this guide, we will discuss the basics of sustainable investing: what it is, why it matters, and how you can make it work for you.
The role of sustainable investing in business
Some people think a business’s job is to pursue profits. We think they’re right.
Some people think a business has a broader responsibility to its employees, customers, community, and world. We think they’re right, too.
For a long time, many believed there was always a trade-off between the two. The conventional wisdom held that pursuing profits meant ignoring responsibility and that when companies considered their people and the planet they lost focus on the bottom line.
The evidence shows that is wrong.
This should not necessarily be surprising, since we see this same dynamic in so many aspects of our lives (as we’ll show below).
Your path to long-term sustainable investing
When you switch to more energy-efficient light bulbs, or buy a car with better fuel economy, you do it for two reasons:
- You know it makes the world a better place.
- You know you’ll save money in the long run – with lower electric bills or at the gas pump.
When you go out of your way to help a neighbor, you do it because it’s the right thing to do, but also because you know that one day you might need the help.
When you buy organic produce instead of foods loaded with preservatives, you do it because they are better for the environment and better for your body, too. They may cost a little more or be less convenient, but you know the advantages outweigh the burdens.
When you make those kinds of decisions – thinking long-term, considering your reputation and relationships, weighing benefits and not just costs – you take the High Road in your personal life.
The managers of companies have to make some very similar choices. Every day, they’re confronted with the decision of taking the High Road or the Low Road.
High Road Businesses care about the environment, their employees, and their reputation — and who put policies in place to reflect this. They are more likely to be innovative, attractive to top talent, and conscious of risks than Low Road Businesses that do not share these policies.
And — perhaps most important from the standpoint of investing — High Road Businesses have been shown to be more profitable and generate higher investor returns.
Why should you care about sustainable investing?
Sustainable investments seek to protect our environment by reducing greenhouse gas emissions, promoting clean energy sources like solar power and wind turbines, protecting critical ecosystems (such as coral reefs), and conserving freshwater resources for future generations.
There are also ways you can help society through sustainable investing including providing access to affordable housing, education services, healthcare, and more. Investing sustainably means taking steps now that will benefit both current society and future generations.
It’s not just about making money, but rather making sure there’s a world left for future generations.
Ways you can invest in sustainable projects
There are many different types of investments that count as sustainable, including those offered by microfinance organizations and Certified B Corporations.
Microfinance is an investment model where small loans or grants (in the form of capital) are given out to people who need them most to start up their business ventures.
It has been proven as an effective way for societies all over the world to combat poverty by creating jobs that provide people with income instead of just handing out aid or money from donors.
A certified B Corporation refers to any organization which meets certain standards regarding corporate responsibility, employee satisfaction/welfare, community engagement activities such as volunteering, and charitable donations.
In order to become a certified B Corporation, a company must complete an assessment which ensures that they meet these stringent requirements.
The risks associated with sustainable investing
Like any other type of investment, there are risks associated with sustainable investing.
One key risk to bear in mind is that sustainable investments may not always perform as well financially as traditional investments.
Another risk is that some sustainable projects may be unsuccessful or even fraudulent – as with any investment, it’s important to do your research before making a commitment.
Getting started with sustainable investing
There are many different ways to get started with sustainable investing and it all depends on what works best for you.
One way is to invest in a sustainable mutual fund. This is a type of investment fund that focuses on companies that meet certain environmental and social criteria.
Another option is to invest in green bonds. Green bonds are debt securities issued by governments or corporations to raise money for projects that have a positive environmental impact, such as renewable energy projects.
You can also work with a financial advisor who understands sustainable investing to help you create a personalized portfolio that aligns with your values.
No matter how you choose to invest, it’s important to remember that sustainability should be one of your key considerations. By putting your money into projects and companies that seek to make the world a better place, not only are you making wise investment choices, but you’re also helping promote positive change.
Invest in your future and the future of the planet
Whatever path you choose, keep in mind that sustainable investing is about more than just making money – it’s about ensuring our planet’s long-term viability.
We can help protect our environment and society while earning a financial return by investing in sustainable projects. There are multiple ways to invest in sustainability, so determining which one best meets your needs is critical.
When making investment decisions, it pays to keep sustainability in mind at all times.