A Look at Sustainable Investing

Investing in companies and causes you care about is nothing new. But as our environmental impact becomes more and more apparent, investing in companies with an emphasis on sustainability is increasing. 

In recent years, sustainable investing has become more popular not only for ethical reasons but also because sustainable investments have performed well overall. As with any investment, the goal of sustainable investing is to see your initial investment appreciate in value.

With sustainable investing, though, you may also benefit from knowing that your money is supporting an environmentally conscious company and a better world.

Types of Sustainable Investing

Sustainable investing goes by many names: Green investing, Socially Responsible Investing (SRI), and ESG Investing.

As these types of investments have grown in popularity, standards have been developed to measure a company’s environmental, social, and governance (ESG) practices. Companies are given an ESG rating in each of these three areas based on their business practices. For instance, a company with net-zero carbon emissions would receive a high rating in the environmental category.

Other factors that go into a company’s environmental rating include how they manage their materials and waste, how their practices affect air and water quality, and more. 

Today, you can find ESG ratings for almost any company anywhere. Platforms such as Bloomberg and Yahoo Finance provide this valuable information to investors just as they do financial stats, such as P/E Ratio and Earnings Per Share (EPS). Additionally, there is a multitude of ESG-focused mutual funds available through almost every broker. This makes investing in sustainable companies easier than ever before.

Accessing sustainability information about companies is about to get even easier, though. The SEC recently proposed new rules that would require public companies to disclose their greenhouse gas emissions and how climate risk affects their business.

This will further reveal how large companies confront their environmental impact. However, it won’t affect those who have benefited from the Jumpstart Our Business Startups Act (JOBS), which loosened SEC regulations for small businesses.

Why Invest in Sustainable Companies

As of December of 2021, the MSCI World ESG Leaders' index had risen 22% compared with the MSCI World Index's gain of 15%. It’s also true that portfolios that contain ESG companies experience greater gains than those that don’t. This goes to show that ESG investments can not only perform but even outperform traditional investments.

While the financial benefit may prove worthwhile, there is certainly something to be said for investing in companies and causes you care about. Ensuring companies that prioritize sustainability and are making important advancements as it relates to climate change have the funding to do so makes the world a better place to live for all of us. This is one way to move the world forward.

As an accredited investor, you have likely invested in many types of businesses, already. So, ask yourself, which investments are you the proudest of? And what can you invest in today to help create a better future? A portfolio you believe in can be incredibly profitable.