Sustainable investing, an approach that integrates environmental, social and governance (ESG) criteria, is becoming a much sought-after strategy in the financial industry. Whether implemented through socially responsible investing (SRI) screening, ESG integration or impact investing, sustainable investing offers a growing number of options for investors interested in pursuing goals beyond financial growth when building their portfolios.
Through sustainable investing, not only can investors aim to make a positive impact on society and the environment, they can potentially improve the risk/return characteristics of their portfolios by factoring environmental, social and governance (ESG) criteria into their investment decisions.
While there is a common theme of pursuing a greater purpose, there is much variety within sustainable investment strategies, particularly in how they are implemented. Implementation generally takes the form of one or more of the following approaches:
1 CFA Institute, “ESG Issues in Investing: Investors Debunk the Myths.” 2015
2 Global Impact Investing Network, “What You Need to Know About Impact Investing,” https://thegiin.org/impact-investing/need-to-know/#s2
The paths to pursuing effective global stewardship and possible growth are coming together in the investor mindset. Sustainable investing, when incorporated into a well-defined, long-term investment plan, can be a powerful tool in addressing global challenges while achieving personal financial goals.
Investors may consider sustainable investing for a host of reasons:
There is no assurance that any investment strategy will be successful. Investing involves risk and investors may incur a profit or a loss.
Sustainable investing, an approach that integrates environmental, social and governance (ESG) criteria, is becoming a much sought-after strategy in the financial industry.