Many people want to make sure that their investment portfolios to reflect their values, while still yielding long term financial returns. That can be achieved through sustainable investing, but how can you tell if your investments match your values? This morning we’re joined by Jas Dhillon for some insights and tips around sustainable investing.
What is sustainable investing, and what is the reason behind the rising trend?
Now a days, sustainability has driven more and more of our decision making every day. Sustainable investing is an approach that guides us to invest our money with companies that we share the same values with, and there’s a few reasons why this approach is accelerating. First, the world is changing, New global sustainability challenges are bringing new risk factors such as climate risk, data security concerns, social and demographic shifts and so on. Investors have come to realize that in addition to those financial metrics, that they should also evaluate companies based on their practices in environmental, social and governance. These are known as ESG practices and there is increased interest from the younger generation of investors who really care about making an impact on the environment and social issues. For these reasons there has definitely been more growth in ESG investment.
What are some of the benefits of sustainable investing and what’s in it for the investors at the end of the day?
From an investor’s point of view, taking a company’s ESG factors into account help us also understand the company’s growth and risk of the company, and controlling your risk exposure is always important when you’re investing in any fund or asset. Companies that have a high ESG score have shown that they actually lower the volatility of their overall investment portfolio. And you’re also not going to hear much about high profile negative incidences from these companies such as mistreatment of the environment or mistreatment of employees. And I would say the biggest benefit is that knowing as you’re building your portfolio you’re staying true to your values and you’re contributing to positive global change with your money.
How does someone get started with sustainable investing?
The first step is really understanding what your goals are. Are you wanting your investments to align with your values? Do you want to start bringing some sustainability factors into your investment portfolio? And the other piece of advice is, once you figure out what values you want to see in your investment we always recommend screening to ensure you’re working with the best businesses in that sector or potentially excluding sectors to narrow down where you want to invest your money.