We’re all worried about our planet. We’re faced with concerns about climate change, social inequality and environmental issues at every turn. So, it makes sense that investments are starting to be seen through a greener lens too. But is it possible to achieve your financial goals while also making a positive impact on the world? Loqbox gets into it.
Sustainable investing (or green investing) and ethical investment funds are on the rise. Loqbox explores what your sustainable investment options are, how to make responsible investments, and the benefits of environmentally friendly investments.
What is sustainable investing?
Sustainable investing, known as green investing or ethical investing funds, is an approach you can take if you’re as focused on the planet as you are about your financial gains. Sustainable investing considers environmental, social, and governance (ESG) factors for the planet as well as aiming for good financial returns for yourself.
Environmental factors
When we say environmental, what we mean is a company that thinks about the impact it has on the environment. This could include how its actions affect climate change, pollution, water and energy efficiency, and the disposal of waste.
Social factors
Social factors include how companies treat their workers, customers, and the communities they touch. Human rights should be at the forefront of their policies, along with implementing secure data privacy and equality for race and gender.
Governance factors
Governance is about how the company that you are investing in conducts itself, and how it is managed. Do you know who owns the company, what the structure of the business is, what their ethics are and whether there is a fair remuneration policy?
The idea is that you would only invest in companies and projects that actively promote sustainability and a positive societal impact, while generating competitive financial returns. It allows you — as an investor — to align your portfolio with your values and contribute to a more sustainable and equitable future.
What is socially responsible investing?
Socially responsible investing (SRI) is like sustainable investing but specifically focuses on companies that uphold social values and ethical standards, and are pro wellbeing, human rights, and diversity. Sectors for tobacco, weapons and fossil fuels would usually therefore be avoided, while renewable energy, clean technology, and healthcare would get the nod.
What are the benefits of sustainable investing?
Sustainability investing offers lots of benefits beyond financial returns, such as putting funds into companies committed to sustainable practices, letting you contribute to positive environmental and social change. Here are some other benefits of sustainable investing:
Securing long-term value
Sustainable companies tend to be well-positioned for the future as they consider potential risks and opportunities related to environmental, social and governance factors. This approach can lead to long-term value creation and more resilient investments for your money. Companies who care about the future, focus on the future.
Making a positive impact
Sustainable investing allows you to align your investments with causes you care about. You can actively support companies that work towards renewable energy, climate action, social justice, gender equality, and other sustainability goals. You want your money to work for you, of course, but you can still prioritise the things you care about too.
It’s a growing opportunity
Sustainable investing has seen significant growth in recent years, with increasing demand from investors seeking ethical and responsible investment options. This demand has led to a wider range of sustainable investment funds and financial products.
Are there other sustainable investment strategies?
Yes, when it comes to sustainable investing, there are various strategies you can adopt. Let’s take a look at some of the main ones:
ESG investing
ESG investing is all about the future. It’s a great option if you’re really committed to environmentally friendly investments. With ESG funds you are investing in a better future for everybody, rather than just in high financial returns. The question that drives ESG investing is: “What’s the point in future wealth if there’s no world left to enjoy your money in?”
Impact investing
If you’re wondering what the difference between sustainability and impact investing is, impact investing goes a step further. It targets investments that generate environmental or positive social impact that is measurable, alongside their financial returns. This approach is suited for those looking to make a direct and visible difference to the world, if that sounds like something you’d be interested in too.
Value-based investing
Not to be confused with ‘value investing’, where you’d invest in undervalued stocks in the hope that their value will later rise and make you a profit (Warren Buffet style).
With the ‘value-based investing’ approach you decide on your investment options by focusing on specific values or themes that are important to you. So if your personal priority is investing in renewable energy, water scarcity, or animal welfare, you can direct your investments to companies that share those values with you.
Is sustainable investing profitable?
Yes, it can be. But there is a golden rule: no investments, regardless of type, are guaranteed to be profitable.
As with any investment options, investing in sustainability could result in you having less money than you originally put in. You should also always be prepared to leave your money in an investment portfolio for around five to ten years to see a return.
If you’re looking to build shorter term savings before then, investing in yourself using a feature like Loqbox Save could help reach your financial goals in the meantime.
Sustainable investment funds are accessible ways to get into sustainable investing. They’re managed by professionals who specialise in finding companies that integrate ESG factors. While you can’t rely on past results, sustainable investment funds have shown good returns, so investing sustainably doesn’t mean you have to sacrifice returns.
Ultimately, sustainable investing offers powerful opportunities to make a positive impact while pursuing your financial goals. By aligning your investments with your values, you can contribute to a more sustainable and equitable world.
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