If sustainable investing isn’t part of your investment strategy yet, you might want to have a closer look at it, as this sector is worth paying attention to for many reasons, even reasons that go beyond doing something good for the planet.
Firstly, of course, these investments allow you to have a positive impact, by investing in projects that improve our environment. Secondly, green investing does have a history of good performance, sometimes beating traditional investments.
Finally, sustainable investments are increasingly used to better mitigate and manage risks in volatile and uncertain times. The S&P Global Market Intelligence has recently shown that sustainable funds beat out the S&P 500 in the 1st year of COVID-19.
So, if you do not have sustainable investments in your portfolio, know that it is never too late to get started! You just need to think about how to add sustainable investments to your portfolio. There are also a range of ways to invest in this sector. You can, for instance, invest in sustainable funds or individual stocks.
Funds are great tools for investors wanting to have an exposure to this market without having to analyze individual companies. By choosing individual stocks, however, you can better support the growth of companies you’ve carefully selected.
These companies may be very popular ones that make the headlines, like what’s currently happening with the Robinhood stock in the traditional market, or they could be start-ups you do not often hear about. Both can provide great returns.
You just need to find the right investment vehicle for your trading strategy and your investment horizon, as each trader and investment have different goals and trading styles.
Why is sustainable investing one of the hottest investment opportunities right now?
Around the world, people are increasingly worried about environmental challenges. With more and more wildfires, flooding, and droughts, governments have no other choice but to acknowledge climate change and act to protect their country’s populace. That’s why most countries have set climate goals to meet.
Therefore, companies providing solutions to address climate changes and deal with any other environmental challenges are increasingly popular, which makes them a great market to invest in. Not to mention that there are many different companies you can invest in, which means that there is something for everyone.
You can choose to invest in companies dealing with pollution control, clean water, or sustainable construction materials, for instance. Renewable energy is one of the most popular sub-sectors, with companies looking to develop new products and services that preserve natural resources while using alternative energy sources.
Not only is sustainable investing about investing in companies fighting climate change and the negative impact people have on the planet, but it is also about supporting companies working towards increasingly considering human well-being in their activity. That’s why sustainable investing is also called ‘ESG’ – investing for Environmental, Social, and Governance – or ‘SRI’, for Socially Responsible Investing.
Regardless of the name you give to investing in companies looking to minimize environmental impact, these firms are here to stay and seek to play a significant role in the future, so you should think about adding them to your investment strategy!
Sustainable Investing: Where to Get Started
Sustainable investing, also known as socially responsible investing (SRI) or environmental, social, and governance (ESG) investing, is an investment approach that considers both financial returns and environmental, social, and governance factors. If you’re interested in aligning your investment choices with your values, here are some avenues to explore.
Sustainable Mutual Funds and Exchange-Traded Funds (ETFs):
One way to engage in sustainable investing is by investing in mutual funds or ETFs that focus on sustainable companies or industries. These funds are managed by professionals who integrate ESG criteria into their investment decisions. They often invest in companies that demonstrate responsible business practices, such as reducing carbon emissions or promoting diversity and inclusion.
Impact investing involves investing in companies, organizations, or projects that generate measurable social or environmental impact alongside financial returns. Impact investors actively seek investments that address pressing issues, such as renewable energy, affordable housing, or healthcare in underserved communities. Numerous impact investing platforms and funds have emerged to connect investors with impactful opportunities.
Community Development Financial Institutions (CDFIs):
CDFIs are financial institutions dedicated to providing capital and financial services to underserved communities and populations. By investing in CDFIs, you can support community development initiatives, affordable housing projects, small businesses, and microfinance. CDFIs often offer investment products with modest returns but with a clear social impact.
Green bonds are fixed-income securities issued to finance projects with environmental benefits. These projects can include renewable energy infrastructure, energy-efficient buildings, or sustainable transportation initiatives. Investing in green bonds allows you to support environmentally friendly projects while earning fixed returns.
Direct Equity Investments:
For more hands-on sustainable investing, you can consider directly investing in companies that align with your values. Conduct thorough research to identify companies with strong ESG performance, sustainable business models, and a commitment to positive change. Engaging in shareholder advocacy by using your voting rights to support sustainability resolutions is another way to influence corporate behavior.
Robo-Advisors and Online Investment Platforms:
Many robo-advisors and online investment platforms now offer sustainable investing options. These digital platforms utilize algorithms and ESG data to create personalized investment portfolios aligned with your values. They provide easy access to sustainable investing for individuals who prefer automated investment management.
Sustainable investing provides an opportunity to make a positive impact while pursuing financial goals. Whether through sustainable mutual funds, impact investing, community development institutions, green bonds, direct equity investments, or online platforms, there are various avenues to explore.
Remember to conduct thorough research, understand the risks involved, and seek guidance from financial advisors specializing in sustainable investing to make informed decisions.