3 min read
Sustainable investing, socially responsible investing, impact investing, conscious investing, value aligned investing — all terms which have recently percolated amongst the wealth management circles. What are the nuances and how can I get involved?
First let’s start with sustainable investing. What does it mean to invest sustainably? Most simply put, it means putting your money where your mouth is.
In other words, to have a voice with your dollars and finding impact alongside a financial return.
Sustainable investing means supporting the companies making a difference in the world by aligning your investments with causes you care about (and avoiding the ones that don’t). return.
These days, it’s much easier to invest using this technique.
In the not-so-distant past, an impact-driven investment strategy was an exclusive, unaffordable opportunity available only to the elite wealthy few. But, with better data and technology available to more people, it’s now possible for everyday investors to invest sustainably too.
Modern investors are more likely to think about the kinds of activities and behaviors their dollars are supporting —not only when they shop, but also with their retirement portfolios and other long-term investments.
A large percentage of institutional investors — such as foundations and pension funds — are integrating Environmental, Social, or Governance (ESG) strategies into their investments leading the ESG movement but more must be done.
The ERISA guidelines in 2016 were more heartening than less so in 2018. Regardless, the $243.2 billion California State Teachers’ Retirement System has put their ESG strategy into action. After undergoing a fifteen month process of identifying 8 ESG asset managers, in 2019 CalSTRS allocated $750 million into Hermes Investment Management, Impax Asset Management, and Schroders “to drive long-term value creation through intensive ESG integration” as per Richard Duran, CalSTRS. CEO Jack Ehnes emphasized “CalSTRS’ commitment to long-term sustainability is critical to fulfilling our promise of a secure retirement to more than 964,000 members and their beneficiaries.”
These larger pools of capital do have the luxury of time with longer time horizons, but perhaps it’s time we all adopt this perspective? It’s time we all think about the E, S and G perspective.
Today, more and more investors believe it’s not enough to avoid investing in companies that have harmful policies or products; they want their investments to actively work toward the changes they want to see in the world.
Your peers and fellow millennials are doing it too. Particularly with women and young families. This group of investors is much more likely to inquire about investments that match up with their values. This is because, in general, young people and women who invest tend to be more considerate about societal impacts that come with generating wealth.
“This trend is driven by a paradigm shift in client demography,” says Ferreol de Naurois, vice president and head of Global Capital Markets Practice at Capgemini. “As more millennials, as well as women, investors come to the wealth market, they are pushing for green, ethical investing.”
This wave of change is just starting to build, which means growing power in numbers and dollars. You could add your money to investments that have the opportunity to make positive change on a massive scale. While people are starting to think about where their investment money is going, 40% of Americans don’t know what they’re invested in. This lack of awareness could mean your investments could actually be contributing to problems that keep them up at night (instead of the solutions).
Conscious investing on the other hand empowers us to know what initiatives we are investing in and whether we want to support them or not. This is your call to action. You can learn what you’re invested in and join the growing ranks of more conscious and aware investors.
It’s never been easier to choose companies you want to support and steer clear of the ones that are working against things you value.
