Why You Should Be Involved In Sustainable Investing
What is Sustainable Investing?
Sustainable investing is also known in many other terms, such as SRI, ESG, and Impact Investing.
SRI is an acronym for Socially Responsible Investing, which it also recognized as Environmental, Social and Governance (ESG) Investing; Ethical Investing; and Impact Investing.
According to USSIF (The Forum for Sustainable and Responsible Investment), the basic description of SRI is: “Consideration of environmental, social and corporate governance (ESG) criteria in addition to standard financial analysis.” Sustainable investing has everything to do with the choice of an investor, regarding which companies are aligned with an investor’s social values.
ESG Gaining Popularity
84% of women and 67% of men are interested in ESG Investing with 86% of millennials and 75% of the total U.S. population. Over the next three decades, over $50 trillion of wealth will transfer to women and millennials interested in ESG, Sustainable, and Impact Investing.
ESG boosts financial performance:
- 90% of sources reveal strong sustainability standards reduce the cost of company capital.
- 88% of sources show strong ESG practices translate into greater operational performance.
- 80% of sources show stock price performance is positively impacted by good sustainability practices.
Meanwhile, 60% of advisors have little or no interest in sustainable investing, while only 6% of advisors are highly interested. We have been investing in this way for decades. We have an identifiable edge.
Investors are requesting for ESG options:
- 76% expect fund managers to look at more than financial aspects of a company.
- 81% want the ability to customize investments, matching their personal values.
- 77% of fund selectors plan to increase ESG offerings.
Institution's value ESG investing:
- 63% say there’s alpha to be made in ESG.
- 72% find engagement of ESG factors to be important to sound investing.
- 72% of institutions have implemented ESG, which is up 18% from 2018.
ESG Investing Myths
ESG can be the foundation of a good portfolio because it helps avoid the potential pitfalls and hazards of intangible asset risks inherent in human undertakings.
Socially responsible portfolios don’t just screen out “sin” companies whose core business pollutes the environment. They now offer a wide variety of strategies which can cater to a specific investor based on their personal values and financial goals.
While in the past socially responsible investing has not optimally performed financially, it doesn’t always require sacrificing financial performance. This has been the case due to portfolios being limited by negative screening strategies, which can impact performance when the best opportunities are in the commodities or natural resources industries. More recent studies have shown that a long-term performance cost to SRI doesn’t exist and socially responsible companies can prove to be better businesses that provide strong shareholder returns.