Financial Education Series
Sustainable Investing
Aligning Your Investments with Your Values
Sustainable investing allows you to generate financial returns while supporting companies that align with your values. This approach considers environmental, social, and governance (ESG) factors alongside traditional financial analysis.
Why This Matters
The global sustainable investment market has grown to over $35 trillion in assets under management, reflecting increased investor desire to generate positive impact alongside financial returns.
Main Approaches
Exclusionary Strategies
Negative Screening
Excluding companies or industries that conflict with your values (e.g., tobacco, weapons, fossil fuels).
Norms-Based Screening
Excluding companies that violate certain standards, such as the UN Global Compact principles.
Divestment
Selling holdings in companies that don't meet your ethical criteria.
Inclusionary Strategies
ESG Integration
Incorporating environmental, social, and governance factors into financial analysis.
Positive/Best-in-Class
Investing in companies with the best ESG performance in their industry.
Thematic Investing
Focusing on specific themes like clean energy, water, or gender diversity.
ESG Factors
Key Considerations
Environmental
Social
Governance
Performance Considerations
Returns and Risks
Current Research
Many studies indicate that sustainable investments can match or outperform conventional investments over the long term. Companies with strong ESG practices may better manage risks and identify opportunities that traditional financial analysis might miss.
Key Considerations
When evaluating sustainable investments, consider factors like fund expense ratios, portfolio concentration, methodology for selecting investments, and track record. Be aware of "greenwashing," where investments are marketed as sustainable without meaningful ESG integration.
Getting Started
Implementation Steps
Step 1: Define Your Values
Identify the environmental, social, and governance issues that matter most to you.
Step 2: Research Investment Options
Explore ESG funds, ETFs, and individual companies that align with your values.
Step 3: Evaluate Performance
Assess the financial performance, fees, and ESG criteria of potential investments.
Step 4: Build a Diversified Portfolio
Incorporate sustainable investments while maintaining appropriate diversification.
This content is educational in nature and updated as of March 2024. We aim to relay factual financial information, similar to how a newspaper would report market data. For complete information about our services, please review our Terms of Service.