When you think about investing, the first thing that likely comes to mind is whether you will get good returns for your money. So, the question is, is sustainable or green investing worth all the hype it has gained in recent years?
Sustainable investing, sometimes called green investing or ESG investing, is buying equity in companies that prioritize social and environmental responsibility. Also known as, sustainable practices. The ultimate objective of sustainable investing is to reduce environmental impact and conserve natural resources. Companies do this by keeping emissions, wastes, and other forms of pollution as low as possible.
However, it is also a proven way to increase your returns, reduce risks, and build long-term wealth, especially during economic downturns. So, yes, sustainable investing is worth the hype. Consider investing in sustainable companies not just for the environment but to secure your financial future too.
So, what’s the best way to invest in sustainable companies? Here are a couple of strategies you can use:
The (ESG) rating is a widely accepted standard of measurement of a company or funds’ performance. It is in regard to environmental, social and governance sustainability.
ESG ratings are conducted by external platforms. They generate figures based on company disclosures, interviews with management, and scrutinizing available company information. However, sometimes, the ratings are done by internal stakeholders.
Now, rating platforms will do things differently, but all fall within one or more of the three categories (E, S, and G).
Keep in mind that while examining ESG scores is a great way to spot companies committed to sustainability, the rating often changes and differs depending on the platform. So, the best picks are those that maintain high ESG scores across various platforms.
Another way to find and invest in sustainable companies is to do a positive or negative screening. Positive screening involves selecting the best-performing companies in a specific industry. Use set criteria to determine this. For instance, you could choose the top three tech companies based on the lowest e-waste generated. Or, on the best waste management practices. Or the top five manufacturing companies based on their social contribution.
Alternatively, you can do negative screening, the opposite of positive screening. With this strategy, you don’t pick the top companies based on your goals. Instead, you exclude those that don’t meet the criteria to leave you with the most suitable.
The third and easiest way to invest in sustainable stocks is to get someone with the right experience to do it for you. The good news is today. You can actually find investment companies that exclusively look for and invest in sustainable companies on behalf of clients.
Basically, they do all the research and heavy lifting for you. All you have to do is invest and monitor your performance periodically.
However, you must choose your investment brokerage firm wisely for the best results. Make sure that your hire understands ethical investing and has commendable experience in the sector. This way you can get a solid footing in the world of sustainable investing. Additionally, you’ll also get valuable advice from a team that understands the ropes.
Saving the planet affects all spheres of life, including our very own survival. So, investing in companies prioritizing environmental sustainability is investing in the future. But it’s not just about the environment. Sustainability extends to social responsibility and good governance.
If you want to build generational wealth and be part of a bigger cause, use the above strategies to find the best sustainable companies and diversify your portfolio.