In recent years, sustainable investing has become increasingly popular as a way to generate long-term wealth while also creating a positive social and environmental impact. Sustainable investing, also known as ESG investing or impact investing, is a strategy that takes into account environmental, social and corporate governance factors when making investments. It is important to understand the three investment strategies and be realistic about the purposes, strategies, and results of the ones you choose. The financial industry has been accused of helping delay government action to combat climate change because the private sector does not want regulations.
However, sustainable investment can be a way to mitigate investment risk and help companies play an active role on key issues such as climate change and social justice. Sustainable investors seek opportunities and financial returns in companies with high environmental, social and government priorities. During periods of high market volatility, sustainable funds generally proved to be more stable investments. Companies that mitigate risk through good governance or whose business practices limit climate vulnerabilities would fall into the realm of sustainable investment.
Other factors of sustainable investment must also be considered, but the environmental element has a time limit. CERES, a non-profit organization whose objective is to change corporate environmental practices, has developed tools that investors can use to find out how companies address climate change and water risks, how to assess companies' progress towards net zero emissions targets, track shareholder proposals on ESG issues, interact with companies and more. This involves excluding certain types of investments or, specifically, including certain types of investments in a portfolio according to the values of each one. More and more investors, especially younger investors, want to invest in companies that take into account climate risks and that are sustainable and socially responsible.
Sustainable investment is a strategy that seeks to ensure that companies generate positive social and environmental impacts, as well as long-term financial gains. With the generational transfer of wealth and the change in sustainability priorities, investors can expect more companies to prioritize ESG factors, as well as more rigorous and reliable sustainability metrics.
