Top Questions About Sustainable Investing-Answered
As a top sustainable ESG investment firm, we are often asked questions about sustainable investing. In this article, we will answer the top five questions about sustainable investing we receive most often from clients and potential investors. Consider this your FAQ page with everything you need to know about investing sustainably. Most of these questions range from the overall purpose of sustainable investing, greenwashing, and the performance of sustainable investing. Hopefully, this will help you decide if sustainable investing is the right choice for you.
The Definition of Sustainable Investing
Sustainable investing is an investing practice that takes more than just numbers into your investment account. If you want your portfolio to make an impact on the world and society, then you need to be investing sustainably. Sustainable investing is also sometimes referred to as SRI, or socially responsible investing. As the demand for sustainable investing grows in the U.S., it is important to be educated on this topic.
Top 5 Questions About Sustainable Investing
These are five questions that we receive frequently about sustainable investing from potential investors.
#1 Question About Sustainable Investing: What is the Purpose of Sustainable Investing?
Sustainable investing is an umbrella term. It is used to refer to many different investment strategies that help increase profits while also contributing to positive social and environmental change. This might include environmental change, positive social change, or governance rules. More than ever before, customers and clients are interested in buying and investing in sustainable products and services. The goal of sustainable investing is to drive positive outcomes for people, corporations, companies, and the planet.
#2 Question About Sustainable Investing: What are ESG Criteria?
ESG stands for Environmental, Social, and Governance (ESG) criteria. It is a set of standards that we at EGÉA SRI take into account when investing in a company or sector. These criteria help you determine if a company is socially responsible. It also gives you a broader perspective on a company than simply using financial metrics alone.
Environmental criteria consider its contributions to broad environmental factors like climate change, energy use, pollution, wasting materials, damage to forests, and harm to wildlife and their habitats. Social criteria are used as a way for investors to evaluate a company’s stance on human rights, political matters, community engagement, commitment to the health, safety, and well-being of its workers and community at large, labor and employee relations, and policies and practices on using child or forced labor. Governance factors take into consideration 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.
#3 Question About Sustainable Investing: What is the Difference Between Sustainable Investing and Environmental Investing?
Many investors who are new to sustainable investing don’t realize that there is a difference between sustainable investing and environmental investing. The two are often confused with each other. However, while environmental investing is always sustainable, sustainable investing does not always mean environmental. Environmental investing is a type of sustainable investing that focuses on choosing investments in companies that support or provide environmentally friendly products and/or services. While some investors are indeed interested in supporting the environment with their investments, others are more concerned with investing in companies that are supporting people and society as a whole.
#4 Question About Sustainable Investing: How Should Advisors Talk to Clients Interested in Sustainable Investing?
There are many different questions to ask investors who are expressing an interest in sustainable investing. All different types of people are interested in sustainable investing. The key is to determine what your client is looking for. Whether they want to open a sustainable Roth IRA or they are considering environmental, social, and governance factors, sustainable investing can mean something different for each investor. Also, there may be certain industries or types of companies the investor wishes to exclude from their portfolio. What is appropriate for one investor might not be appropriate for another.
#5 Question About Sustainable Investing: What is Greenwashing?
Some companies claiming to be “green” or “sustainable” are actually neither of those things. Greenwashing is when a company purports to be environmentally conscious for marketing purposes but is not actually making any real efforts to be sustainable. It is important to look out for companies that are saying they are sustainable, but actually aren’t, when you are working toward investing sustainably.
Bonus Question About Sustainable Investing: Is Sustainable Investing Profitable?
Another question we are asked frequently about sustainable investing is if it can really be profitable. The answer is yes. A number of factors have made sustainable investing increasingly popular and attractive in the U.S. over the last decade. You do not have to sacrifice performance or profit for sustainability in your investments. An analysis by the Morgan Stanley Institute for Sustainable Investing looked at 3,000 U.S. mutual funds and EFTs and found that sustainable equity funds outperformed traditional peer funds by a median total return of 4.3 percentage points in 2020.
Questions to Ask Investors
If you invest with EGÉA SRI, we take the time to ask you questions and get to know your beliefs and values. This is how we can help you invest in a manner that aligns with your personal values. Our team can help you make your 401(k) sustainable or help you invest a small portion, or all, of your funds in sustainable companies and sectors.
EGÉA SRI Can Answer All of Your Investment Questions
As one of the top firms for value-based investing, please contact us if you have any additional questions about sustainable investing. We create and manage sustainable portfolios. Our team will be happy to answer any of your sustainable investment questions.
Do You Have More Questions About Sustainable Investing?
At EGÉA SRI, we help you match your investments with your beliefs and values. Let’s make a difference together. Open an account or set up a free consultation today!
Disclosure:
Socially Responsible Investing (SRI) / Environmental Social Governance (ESG) investing has certain risks based on the fact that the criteria exclude 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.
