A woman’s guide to sustainable investing
By Autumn Sevy
Photo by micheile henderson / Unsplash
Getting into investing can feel like an overwhelming process, especially as a woman in her 20s.
I’ll admit that up until recently, I passed the baton to my partner and tuned out any financial jargon whenever we discussed investing as a way to acquire wealth.
But investing doesn’t have to be daunting or morally compromising. In an era where sustainable investing is becoming more mainstream, investing can even be an empowering way to support meaningful causes while acquiring wealth.
What is sustainable investing?
As an investor, the aim of sustainable investing is to achieve financial gain while putting your money in companies that promote long-term positive environmental or social change.
Companies evaluate their sustainability and ethics through a scoring system called the Environmental, Social and Governance score, or ESG.
ESG ratings take into account topics such as climate change adaptation, carbon emissions, labor management and business ethics.
A company can be rated from zero to 100 and described as poor, average, good or excellent.
When making sustainable investments, find companies with low risk ESG scores that align with your values.
Why should you sustainably invest?
If climate change, sweatshops, weapons trade, the prison industrial complex and animal testing are issues that matter to you, investing sustainably is a realistic way to support causes you believe in.
More and more investors are more conscious about where they are putting their money and whether or not those companies align with their values.
Pros and cons of ethical investing
Sustainable investing is a great way to grow your money while also being conscious of the values and issues that matter to you. However, it’s important to recognize that sustainable investing is not perfect. You will see from the ESG score that some companies may do well in weapons trade but terrible in fossil fuel usage.
Understanding the reality of sustainable investing should not deter you from it. Investing in sustainable companies and ETFs remains the best way to reduce harm and promote sustainability in our world. It also increases the growing pressure on companies to adhere to ethical standards to gain more investors.
Another argument against sustainable investing is the claim that your money will not grow as much in ethical investments as it will in traditional investments. However, a study that looked at over 20 years of stock market data found that returns from sustainable investing are proven to be on par with or greater than returns on traditional investments. Studies also show that investments focused on ESG factors endured times of volatility or recession better than their conventional counterparts.
Whether you want to vote with your wallet, achieve higher returns or invest with lower risk, ESG-based investing could be a great option for you!
How to get started sustainably investing:
1. Choose your sustainable investing strategy
ESG-based investing is just one of many sustainable-investing strategies to choose from. Other strategies include “negative screening,” “positive screening” and impact investing. Although basing your strategy on ESG scores is a popular and self-explanatory way of defining your sustainable strategy, look into other strategies that may also suit your ethics and financial goals.
Photo by Liza Summer / Pexels
2. Determine what method of investing works for you
If you’re eager to get into sustainable investing, there are several avenues of investment assets to choose from.
ESG funds
If you prefer a more hands-off approach to investing, you might consider paying into mutual ESG funds. A mutual fund is an organization that pools assets from individuals and invests it into securities like stocks or bonds.
ESG funds are typically associated with lower risk than investing in individual stocks. However, investing can be highly personal and some may prefer the freedom of choosing their own stocks.
Individual stocks
If you like the idea of researching the sustainability initiatives of each company in your portfolio, you may want to find your own ESG investments.
A stock is a security that represents ownership of a fraction of a company or organization. Finding your own ESG stocks to buy involves looking over a company’s ESG score, impact report and employee reviews.
For those unafraid to pay service fees, robo-advisors or financial advisors are good ways to invest without spending too much time on research.
No matter your strategy of choice or method of investing, sustainable investing is a tangible way to make a difference.
Read More
