Many people want to do as much as possible with their money — whether they’re hoping to buy a family home, help their children pay for college, or create generational wealth that can benefit their loved ones for years to come.
For many of these people, sustainable investing is another appealing option. Why? Because if you add sustainable investments to your portfolio – whether you’re saving for retirement or saving for a down payment – you have the opportunity to benefit not only yourself and your family, but the planet as well. The plants, animals and people who contribute to our ecology and make our natural world habitable.
That’s why we asked Claire Smith, founder of humane investment platform Beyond Investing, how to get started with sustainable investing. We also asked her how sustainable investing differs from ESG investing, what kind of financial returns you can expect from sustainable investing, and why you should consider adding sustainable investing to your portfolio.
What are sustainable investments?
“Sustainable investing is investing for humanity,”
; says Smith, “with the goal of creating a cleaner, healthier world.”By choosing sustainable funds, you put your money where it really matters – towards companies committed to tackling large-scale problems like climate change. Your portfolio may contain investments in, for example, clean energy or alternative meat products. Your money can also support businesses that work to end hunger or provide affordable housing.
“You’re investing in companies that provide solutions,” Smith explains—and those solutions are likely to offer dividends that go far beyond what you can see in your portfolio.
Sustainable agriculture for example. Responsible land use. Biodiversity. Reforestation. Clean water for all.
How do sustainable investments differ from ESG investments?
Many people are already familiar with ESG investing or impact investing and may have added ESG funds to their investment portfolios – but not everyone understands the difference between ESG investing and sustainable investing.
“ESG investing is broader than sustainable investing,” Smith told us. ESG stands for environment-, socialand (company) steering, After all. And while social and corporate governance may be important factors in your investment decisions, only one of these factors has a direct effect on the planet.
“Governance is really about running businesses properly, with appropriate checks and balances,” says Smith. “It has more to do with ethics than sustainability.” The social justice goals associated with ESG investing may sometimes overlap with the goals of sustainable investing—preventing a small community of indigenous farmers, for example, from being displaced by a large foreign corporation—but the one aspect of ESG investing that is guaranteed to be sustainable is the environmental aspect.
“The environmental aspect of ESG is most closely related to sustainability,” explains Smith. “The activity of running the business without depleting natural resources in a way that they cannot be recovered.”
While some ethical investments can create sustainable investment strategies, the best way to invest sustainably is by looking for companies that are actively working to switch fuels, biomass energy sources, renewable agriculture, permaculture and other long-term solutions to the biggest problems facing our planet infront of. .
What kind of financial returns do sustainable investments provide?
The stock market is unusually volatile right now — but that doesn’t mean a sustainable investment won’t pay off in the long run. “Some investments come with higher risk,” explains Smith, “but they also offer potentially higher returns.”
Sustainable investments may become even more rewarding in the near future. As the sustainable sector grows, more people will be able to put their money into the companies and causes they value – which can increase the value of those investments.
“We offer a US Vegan Climate ETF,” Smith told us, “which quickly outperformed the market in the first year of launch.” (Of course, as is the case with all investments, past performance is no guarantee of future performance.)
How can you get started with sustainable investments?
If you want to get started with sustainable investments, you have three options. You can work with a broker or roboadvisor to identify sustainable investments. You can look for listed companies that do sustainable work. You can also search for organizations such as Beyond Investing, Adasina or Impax Asset Management, all of which offer stocks, ETFs or index funds that you can add to your portfolio.
As you become familiar with the different types of sustainable investments out there, consider broadening your investment strategy to include other types of socially responsible investments, such as investments that benefit indigenous peoples. One of the best ways to support the planet is by supporting the people who are currently doing sustainable work – and by investing in businesses and communities that provide solutions to unsustainable problems, your money can go not only to your own financial future, but also the future for generations to come.
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