Sustainable Investment: What It Is and How to Do It

Sustainable investment is a venture approach that incorporates environmental, social and governance principles by considering its impact on the mentioned factors and one another and productivity (Verheyden, Eccles & Feiner, 2016). The idea is premised on optimizing benefits of investment while minimizing the negative impacts on the environment and other stakeholders involved.

Investors Concern ESG 

With the global transformations affecting the availability of resources, the adoption of ESG is the most practical option for investors. Investors have the power to determine the fate of the earth, which has suffered much-unregulated investment practices. Far gone are the moments when investors would consider making a profit as their focus to a time when the environment must be preserved. Therefore, good governance practices must be implemented and the society must be protected as their needs are supplied. Investors can control these elements by choosing on which company to invest in. By investing in a company practicing ESG standard, a safer future is guaranteed.

ESG versus Non-SGE Businesses 

Research has proven that companies practicing ESG principles outperform companies that do not do so in stock markets and accounting. Besides this, ESG screening improves the company’s ability to manage risks, which may reduce performance (Verheyden, Eccles & Feiner, 2016). Finally, the adoption of ESG practices is helpful in managing production costs as the company can increase its investments and making more profit, unlike non-ESG companies that do not practice sustainability. Thus, ESG-practicing companies can outperform non-ESG companies.

Socially Responsible Fund 

Socially responsible fund refers to an investment directed toward companies that operate sustainably. As indicated earlier on, an investor should consider himself socially responsible for the kind of businesses invested. Some of the socially responsible investments include clean and renewable energy, clean technology, environmental sustainability, and social justice companies.

References

Verheyden, T., Eccles, R. G., & Feiner, A. (2016). ESG for All? The Impact of ESG Screening on Return, Risk, and Diversification.  Journal of Applied Corporate Finance, 28 (2), 47-55.