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Sustainable Investing: Myth vs. Reality

Sustainable Investing: Myths vs. Realities

Interest in sustainable investing is growing, but there are several common misconceptions surrounding sustainable investing. The most common misconception regarding sustainable investing is that you have to concede financial returns in order to invest sustainably. However, this is far from the truth. In fact, firms with excellent environmental and social records tend to perform comparably or even outperform their peers. Additionally, they are often better protected against downside risks and controversies. In this article, we will discuss the myths vs realities of sustainable investing. 

What is Sustainable Investing? 

Before we break down the myths surrounding sustainable investing, let’s first define sustainable investing. Sustainable investing is an investing strategy that aims to achieve financial returns while also promoting long-term environmental or social value. Sustainable investing combines traditional investment approaches with environmental, social, and corporate governance (ESG) factors. 

Investments that are considered sustainable might include green infrastructure, renewable energy, affordable housing, and more. It helps shape the world by contributing to positive change. Sustainable investing gives you the opportunity to make an impact on your portfolio

Despite the growing popularity of sustainable investing in the U.S. and beyond, there are lingering misconceptions. 

Sustainable Investing: Myth vs Reality

investing sustainably

Let’s break down ten of the common myths surrounding sustainable investing, and the actual truth behind those myths. 

Myth: You Have to Give Up Returns With Sustainable Investments 

Reality: The top myth surrounding sustainable investing is that it won’t yield comparable returns to traditional investing. However, that is not the case. You do not have to give up returns to invest sustainably. Actually, returns on sustainable investments can be comparable to traditional investments. Historically, the S&P 500 Index and the MSCI KLD 400 Social Index (a sustainable U.S. equity index of comparable size and style) have performed similarly.

Myth: You Can’t Measure the Impact of a Sustainable Investment 

Reality: Companies and funds are increasingly reporting on their social and environmental impact. Impact investing, the most intentional sustainable investing strategy does require measurement. Many financial institutions are developing scores and strategies to help investors score the “greenness” of their investments. 

Myth: Sustainable Investing is Just a Trend That Will Pass 

Reality: Sustainable investing is much more than just a fad. According to the US SIF Foundation’s Biennial “Trends Report” from 2020, $17 trillion of assets were managed sustainability in the United States. This is a 42% year-over-year growth rate from 2018. Increasingly, investors are asking themselves, “how do my investments affect the world/” Sustainable investing is, well, sustainable. Some even say it is the new normal. 

Myth: Sustainable Investing Means Excluding Companies from Your Portfolio 

Reality: Historically, sustainable investing focused on avoiding investments that did not line up with the investors’ beliefs. This might mean avoiding alcohol, casino, firearms, or tobacco stocks. The practice of exclusionary screening, which is removing companies that are not values-aligned from your portfolio, is just one approach to sustainable investing. There are other approaches to sustainable investing, including positive, intentional approaches like ESG (environmental, social, and governance) integration and impact investing. 

Myth: Sustainable Investing is Only About Equities 

Reality: Sustainable investing has moved far beyond an equity-only approach. There are several different sustainable fixed-income investments. Some examples include green bonds, development bank bonds, corporate bonds, and sustainable municipal bonds. 

Myth: Sustainable Investing is Only About Protecting the Environment

investing myth

Reality: While sustainable investing can certainly include protecting the environment, it is also about society as a whole. Sustainable investing incorporates ESG considerations. ESG environmental factors, but also social and governance risks and opportunities. 

Social criteria include the company’s stances on human rights, political matters, community engagement, commitment to the health, safety, and well-being of its workers and community at large, its labor/employee relations, and policies and practices on using child or forced labor. Governance factors take into account a company’s business ethics, board structure and independence, diversity of leadership, representation of women and minorities on governing boards and in executive-level positions, and companies managed in ethically responsible manners.

Myth: I Need to Be an Expert to Begin Sustainable Investing 

Reality: You do not need to be an expert to do sustainable investing. There are several products available that focus on sustainable investing strategies, like mutual funds, separately managed accounts, and exchange-traded funds. There are also sustainable investment firms like EGÉA SRI that serve clients nationally by aligning clients’ beliefs and values with their investments. 

Myth: Sustainable Investments Aren’t Liquid

Reality: Liquid investments can also be sustainable. There are sustainable investing solutions available in public equities and fixed income, as well as private equity and private debt.

Myth: Wealthy Individuals Don’t Invest Sustainably

Reality: Several high-net-worth investors invest sustainably. Wealthy investors are increasingly putting their money toward socially, ethically, and environmentally conscious businesses. According to Capgemini’s World Wealth Report 2020, more than a quarter (27%) of high net worth individuals said they were interested in sustainable products. (HNWIs have at least $1 million to invest.) That number rose to 40% among ultra-high net worth individuals, which are those with $30 million or more to invest. Not only is it not true that wealthy individuals don’t invest sustainably, but they are also leading the charge and increasing the demand for sustainability in investing. 

Myth: There Aren’t Any Benchmarks for Sustainable Investing

Reality: There are benchmarks for sustainable investing. Benchmarks are standards or measures used to analyze the allocation, risk, and return of an investment or portfolio. UBS and others have created benchmarks for various sustainable investing approaches. 

Start Investing Sustainably with EGÉA SRI

Do you have more questions about the myths vs. realities of sustainable investing? With the assistance of the experts at EGÉA SRI, anyone can begin making a difference with sustainable investments. You, too, have the opportunity to make the world a better place with sustainable investing. We offer sustainable portfolio management for everyone from casual investors, high-net-worth individuals, nonprofit institutions, or anyone interested in making a difference in the world through sustainable investing. We can help you make your 401k sustainable. If you are ready to start investing sustainably, contact us at  EGÉA SRI.


Socially Responsible Investing (SRI) / Environmental Social Governance (ESG) investing has certain risks based on the fact that the criteria excludes securities of certain issuers for non-financial reasons and, therefore, investors may forgo some market opportunities and the universe of investments available will be smaller.

This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice.  If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

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