Disclaimer: First of all, the old saying that it takes money to make money is true. For those living paycheck to paycheck, there often isn’t enough money left over to put towards investing so this article is not about unnecessary pressure. Secondly, hopefully, by reading this article and a few other out there, by talking to your financial advisor(s) and gaining knowledge, you are taking one of the necessary first steps in building a retirement nest egg. Finally, this article is not about the importance of investment or how to invest. It is for informational purpose only.
Have you ever heard of Sustainable Investment? Do you want to invest like you care, while making money and making sure your pension is not only riddled with oil and defense companies?
Sustainable investing is an investment approach that considers environmental, social and governance (ESG) factors in combination with financial considerations in portfolio selection and management. Environmental factors relate to a company or industry’s interactions with the physical environment, social factors concern their social impact on a community or society, and governance factors typically relating to how companies and/or countries are governed. Example of ESG factors are the followings:
|Climate change and carbon emissions, Greenhouse gas (GHG) emissions, Air and Water Pollution, Waste Management, Energy, Biodiversity impacts||Community relations, Labour standards and working conditions, Health and Safety record, Gender and diversity (inclusion), Recruitment, development and retention, Access and affordability||Executive pay, Board gender diversity, Tax strategy, Disclosure, Board diversity (racial and ethnic diversity), Political contributions|
Although much of the increase in sustainable investment is attributable to institutional investors, the other two main drivers are women and younger investors who are transforming the investing landscape. These two investor personnel are demanding investments that go beyond the traditional financial metrics and include ESG factors. For example, 64% of women investors consider ESG factors when making an investment decision and millennial investors are nearly twice as likely to invest in companies or funds that target specific social or environmental outcomes.
So if you want to invest in the markets like you care, while making money and making sure your pension is not only riddled with oil and defense companies:
- Get engaged and educate yourself about sustainable investment. There are many resources out there (including this book by Marc de Sousa -Shields). There are also a few podcasts that talk about sustainable investment.
- If you are dealing with an institutional investor such as a bank, don’t hesitate to ask them about their sustainable investment strategies.
- Conduct research to find out which companies or funds are both socially responsible and profitable.
- Ask questions when you talk to your financial advisor. You don’t need to be a client with a $1 billion foundation with an environmental or social impact mission. Here are some of the questions I asked my financial advisor:
- what sustainable investment options were available to me;
- what was the financial performance of the sustainable mutual funds that I was interested in;
- how to assess my sustainability goals (including my financial goals and risk appetite) and interests and determine together how I wanted to reflect these goals and interests in my financial plans and investment strategies.
I hope this was helpful.
Written by Awovi, founder of