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Sustainable or responsible investing is all about putting your money to work in a way that’s not only profitable, but also aligns with your personal values and positively impacts society. In other words, it’s a type of investment strategy that factors in environmental, social and governance (ESG) factors when deciding where to place your money.
These types of investments have become increasingly popular in recent years as investors and everyday people alike grow more aware of the negative impact that their financial decisions can have on the world.
This article will explain what is sustainable investing, how it works and why you should consider making it part of your own personal finance strategy.
What Is Sustainable Investing?
Sustainable investing is the process of investing in companies, funds and/or other financial products that have positive social and/or environmental impact. Sustainable investing strategies can also include investing in mission-aligned companies that have good long-term financial prospects and/or ESG ratings.
Sustainable investing can be as simple as choosing to invest your money in a socially responsible mutual fund (an investment fund that holds a range of stocks, bonds and/or other assets), and it can be applied to the stocks and bonds you already own in your portfolio.
While sustainable investing is about making choices about your money, it’s also about making choices about the world you want to live in. This approach takes into account the environmental, social and governance-related factors of a company and/or product’s existence and impact.
By making socially responsible investments, investors can actively encourage sustainable business practices, while also generating a positive financial return.
How To Go About Sustainable Investing
There are a few things you can do to make sure you’re actively practicing sustainable investing. First, make sure you’re diversifying your portfolio. Potential risks to your portfolio are largely caused by putting all of your eggs in one basket. Diversifying your portfolio will help you guard against this.
You also need to make sure that you select investments that align with your values. You can do this by selecting investments that are consistent with your social, environmental and governance (SEG) values.
Make sure to monitor your investments. So, what is sustainable investing? Sustainable investing isn’t a “set it and forget it” type of strategy. Instead, it requires ongoing monitoring and evaluation of your investments, so that you can see how they’re impacting the world and make adjustments as necessary.
The Bottom Line – Is Investing Sustainably Worth It?
Sustainable investing is all about putting your money to work in a way that’s not only profitable, but also aligns with your personal values and positively impacts society.
When you invest sustainably, you’re choosing to invest in companies and funds that are making a positive impact on the world.
Investing sustainably will also encourage sustainable business practices in the process. This could include reducing their carbon footprint or advocating for fair labor practices.
That said, sustainable investing isn’t easy. It requires research, patience and a genuine and sincere consideration for the impact that your investments are having on the world.