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Building a successful, diverse investment portfolio is an important part of any profitable financial strategy.
One emerging trend that is becoming more popular is sustainable investing. This type of investing can lead to positive social change and promotes environmentally friendly business practices. Focusing on sustainability can be beneficial for both investors and businesses.
This guide will explore sustainable investing and how your company can promote sustainability and improve your ESG rating.
Sustainable investing, or ESG investing, focuses on promoting socially responsible principles, such as when the investor considers the environmental, social and governance aspects of an investment opportunity before choosing which companies to support.
Sustainable investing puts more of the focus on long-term societal goals instead of short-term financial gains. With the current push towards more sustainable business practices, companies would do well to focus on improving their ethical and responsible practices.
Sustainable investment opportunities are evaluated based on their environmental, social, and governance (ESG) factors and given an ESG score out of 100. An investment is considered more sustainable, the higher the score is. The following are considerations used to determine a score:
When investors seek out sustainable investment opportunities, they usually look for companies with values that align with their own and care about the same causes they do.
For example, if someone cares deeply about the effects of climate change, they might not invest in oil or gas companies. Instead, they will look for companies trying to decrease their carbon footprint and use environmentally friendly practices and materials.
To make this process easier, many individual investors and investment firms rely on ESG scores to guide their funds. This number offers a quick snapshot of the sustainability of a potential investment.
According to a 2020 report from The Forum for Sustainable and Responsible Investment, more than $17.1 trillion in assets were involved in sustainable investment strategies at the end of 2019. This represents about one-third of the $51.4 trillion in total assets tracked through professional management. In the chart below, you can see how the sustainable investment trend has sharply increased since 1995.
Another indicator of the increasing importance of sustainable investing is the performance of ESG funds. In the first five months of 2020, many ESG exchange-traded funds (ETFs) performed better than the S&P 500.
These positive trends can help investors feel more confident in choosing sustainable investment strategies without sacrificing financial returns. It also shows businesses how important focusing on ESG factors can be.
Like any investment opportunity, sustainable investments require research. To start, you can read through “best of” lists published by top financial advisors and organizations. These lists may include individual investment opportunities along with funds that group investments together.
For more guidance, investors can try an automated investment approach. However, fees may be associated with these investments, and the ESG guidelines may vary between organizations.
The most customized approach is to work directly with a financial advisor who specializes in sustainable investing. This method will be more expensive. However, your advisor can consider your entire financial situation, including other investments and your personal goals.
For businesses that want to draw in more investments, it is critical to focus on their ESG performance. Modern investors, especially younger generations, want to put their money into companies that share their values.
Here are a few things your business should consider as you work towards increasing your sustainability:
In this video, CNBC’s Silvia Amaro discusses some of the challenges associated with ESG investing and why businesses need to consider these factors to continue earning valuable investments.
To help showcase your company’s sustainability efforts, you need to build ESG into your sales and marketing strategy. Televerde has proven processes and experienced professionals that can help your business meet your sales and marketing goals.
We can help you emphasize your environmental, social, and governance practices while helping you achieve your other business objectives.Contact us today to learn how to get started.All News & Blog