Sustainable investing is a way of evaluating investments that takes into account environmental, social, and corporate governance (ESG) factors. This type of investing allows people to select investments based on their personal values and priorities. Initially, sustainable investing was seen as sacrificing profitability for value-aligned investment options, but in recent years investors have used ESG risk factors to create a “best-in-class” modern investment approach that generates returns that are in line with and often exceed market benchmarks. Wealth and asset managers have experienced a surge in client funds earmarked for sustainable investments. Sustainable investment can help shape the future of how companies interact with the world around them, the people they hire, and the products they manufacture.
It refers to a series of practices in which investors seek to obtain financial returns while also promoting long-term environmental or social value. ESG ETFs (exchange-traded funds) have become more popular, making sustainable investing more accessible and affordable than other types of mutual funds. A recent study by Morgan Stanley showed that “investing in sustainability tends to match, and often exceed, the return of comparable traditional investments.” This shift towards higher than market performance in several sustainable investment products has contributed to the increase in demand for these products, as trustees seek to serve their customers not only by generating returns, but also by evaluating the impact. Sustainable investing has become increasingly popular due to the demand of millennials and impact investors concerned with ethical investing or financing companies with intrinsic values that have a positive impact and drive change. Companies best prepared to address sustainable investment and the intergenerational transfer of wealth together will not only capitalize on the acquisition of new customers, but will also effectively serve their current customer base. It has also been shown that individuals and businesses can benefit economically by making their investments more sustainable. ESG funds invest in companies with business practices that allow them to have a social and sustainable impact on the world.