The ‘What’ and ‘How’ of Sustainable Investing

The ‘What’ and ‘How’ of Sustainable Investing

Being eco-friendly and green are obviously important in today’s world of waste and global warming, but most people inadvertently draw a line in the sand when it comes to finances. They might act sustainably in 90 percent of their daily actions, but they don’t put their money where their mouth is. Thankfully, there are plenty of options to do so. 

What is Sustainable Investing?

Sustainable investing is essentially the practice of investing in companies, stocks, and initiatives that positively impact the environment and society. This often includes green energy investments, such as solar or wind, but is not restricted to these types of companies.

“A sustainable investing strategy is any method of investing that considers an investment’s impact in addition to its financial return,” investor Alana Benson writes. “Sustainable investing strategies can really vary: For one person, it may mean investing a set amount of money at a certain cadence (such as monthly) into an ESG fund. For another, it could mean researching every company they plan on investing in to ensure those companies’ missions align with the investor’s values.”

In other words, much like traditional investing, every sustainable investment strategy is unique. They may all have the same underlying ethos, but the execution and results vary from one portfolio to the next. 

4 Tips for Sustainable Investing

Do you want to get involved in sustainable investing? Here are some different tips, techniques, and best practices to get you moving in the appropriate direction:

1. Try ESG Funds

If you want to continue investing in stocks and funds, you’ll want to switch to ESG funds that put a major emphasis on sustainability.

As Robeco explains, “ESG funds are portfolios of equities and/or bonds for which environmental, social and governance factors have been integrated into the investment process. This means the equities and bonds contained in the fund have passed stringent tests over how sustainable the company or government is regarding its ESG criteria.” 

Interestingly, research shows that ESG funds actually outperform traditional funds over most periods. They also experience lower volatility. This is especially true in down markets, likely because of their superior risk management infrastructure. 

2. Align Your Investments With the Right Partners

Let’s say you’re already invested in your own private investment, like a rental property. How can you make this investment more sustainable?

One option is to partner with companies that prioritize sustainability. For example, there are property management companies that put sustainability first.

As Crown Luxury explains, “We focus on projects that have sustainable development and green building techniques which we analyze in the context of the life-cycle of the building, rather than at the beginning of building construction.” 

Small details like this can help you feel better about your investment portfolio as a whole. 

3. Exercise your Proxy Vote

When you’re a company shareholder, you can help the company make decisions by exercising what’s known as a “proxy vote.” Most investors ignore this right, but if enough people feel strongly about an issue, they can actually move the needle. This happened recently with palm oil.

People use palm oil everywhere, but because of advocacy on behalf of shareholders during proxy voting, investors made sure there was less deforestation in the harvesting and production of the oil in Southeast Asia. This led to less pollution and fewer greenhouse gasses. 

4. Detach From Toxic Investments

In addition to investing in the right causes, you should do your best to decouple your portfolio from toxic investments. For example, if you know that one of your funds is heavily invested in companies that participate in hostile overseas relationships or unsustainable business practices, you should trade these funds out and swap in something that aligns better with your values. It’s not easy – particularly if the fund is performing well – but it is necessary. 

Put Your Money Where Your Mouth Is

If you’re a true believer in living a sustainable lifestyle, it’s important that you don’t just talk about it. Likewise, you can’t just arbitrarily pick and choose which areas of your life are convenient for prioritizing sustainability. Your wallet needs to follow suit.

As this article shows, there are plenty of opportunities to invest in sustainable causes, companies, and initiatives. Hopefully, you leave with a few ideas that you can put into action over the coming weeks and months.

Article Submitted By Community Writer

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