Businesses that prioritize their higher purpose serve their customers and employees more humanely, which helps ensure they remain profitable over time – which benefits everyone involved.
Advances in medicine such as ReWalk and Gilead Sciences represent sustainable investments that support companies that research and develop treatments for paraplegics, HIV infection and Hepatitis C.
What is Sustainable Investing?
Sustainable investing (sometimes referred to as socially responsible investing or SRI) seeks to align investments with your morals and values while still producing long-term returns. It could mean as simple as avoiding companies that do not share your opinions, or screening all investment decisions for environmental, social and governance (ESG) factors.
Some investors fear that investing in ESG-aligning funds may bring lower returns than non-ESG alternatives, but research shows otherwise. ESG funds have typically performed just as well as their traditional peers; during the coronavirus crisis in early 2020, some sustainable investments actually outshone non-ESG stocks!
Of course, all investments carry some risk and their value may rise or fall over time. When investing in sustainable companies or ESG-aligned exchange-traded funds (ETFs), keep long-term goals in mind and diversify your portfolio accordingly.
How Can I Invest in Sustainable Companies?
There are various ways that sustainable investments can fit into your portfolio. One strategy involves investing directly in companies making an environmental difference.
Consider working with a sustainable financial advisor or platform. They can assist in creating an investment strategy that matches up with your values, and can identify opportunities through ESG funds and other sustainable vehicles.
Many platforms will soon be launching, such as Sagefund – an online wealth manager focused on sustainability; mattrvest, which connects you with ethical advisors and platforms; and Vantik, a debit card offering sustainable ETFs as a retirement savings strategy. Keep an eye out on their waiting lists to be among the first to experience them first-hand!
If you’re considering investing on your own, one option would be to examine each company’s annual sustainability reports and search for concrete goals and numbers rather than vague anecdotes. Companies with strong initiatives often report progress via corporate social responsibility reports or websites.
How Can I Invest in ESG-Aligned Funds?
As interest in ESG investing has increased, many investment firms have taken notice and launched funds with specific sustainability goals or changed existing funds to include ESG in the name. Some ESG funds even exclude fossil fuel companies such as Green Century Funds, BlackRock’s LCTU fund and Trillium Asset Management/Parnassus Investments funds as portfolio components of their ESG-align funds.
Individual investors have several options available to them for finding funds that meet sustainable criteria online or via free databases that allow sorting by factors like asset class, minimum investments and expense ratios. Organizations like As You Sow also rank funds according to categories like fossil-fuel-free funds, gender equality investments and investments made into private prison operators investments.
If you need help adding sustainable elements to your portfolio, consult with a financial advisor with a Chartered Sustainable and Responsible Investment Counselor credential. But keep in mind that ESG-friendly funds often charge higher fees than traditional index funds and often hold more concentrated stocks in one industry sector.
How Can I Invest in ESG-Aligned ETFs?
There are various ways that ESG investing can fit into your portfolio. One approach is investing directly in companies that prioritize ESG criteria; another option is investing in ESG-align ETFs which offer diversification while supporting various social and environmental causes.
Many brokerage firms and fund companies now provide an array of ESG-aligning funds, as well as robo-advisors like Betterment and Wealthfront that specialize in this space. If conducting your own research isn’t your forte, consulting an advisor familiar with ESG could be the ideal way to achieve your financial goals.
Before investing in ESG-aligned funds, it’s essential to assess both your investment objectives and risk tolerance. For example, if your aim is growth-orientated investing, make sure the ETFs align with this objective. In addition, be wary of high fees which may outweigh potential ESG benefits.