Sustainable Investing – What Does it Actually Mean?
For many people, investing is about much more than financial freedom – it’s also about using their money to reinforce their personal principles. Sustainable investing (also referred to as socially responsible, principles-based, ethical, and impact investing) is one such way to not only benefit yourself but also benefit others with your investment decisions.
Understanding Sustainable Investing
Sustainable investing is a relatively new approach, but one that is gaining ground. When you invest right now, you look at a company’s overall profile and use a variety of data to determine that company’s chances of generating a profit for you in the future. When you add sustainability into the mix, you also consider that company’s impact on the environment. For example, if you wanted to invest in a sustainable up-and-coming tech company, you would want to know if that company took steps to ensure its processes were as environmentally-friendly as possible.
Choosing the Companies
Traditional investing involves learning about a company and its practices, ethics, and overall business plan. This kind of information can help you decide that company’s likelihood of ramping up revenue in the future, which can help you enjoy good returns on your investment. When you are considering sustainable investing, there are other factors to consider. These include:
- Renewable and sustainable energy. Does the company you want to invest in generating its own energy or take its energy from a renewable and sustainable source, such as solar or wind power?
- Energy efficiency. Is the company dedicated to keeping its operations as efficient as possible and using as little energy as possible?
- Eco-friendly materials. True sustainability is all about making sure the raw materials being used to manufacture (or even ship) products are sourced responsibly.
- Waste reduction. Companies that prioritize sustainability will have waste reduction measures in place, and they will also reuse and recycle materials wherever possible.
- Chemical reduction. Finally, does the company do its part to reduce the use of environmentally harmful chemicals in its processes?
Why Should You Invest in Sustainability?
People who practice sustainable investing do so for two very important reasons. First, when big investors – including people like Bill and Melinda Gates – put their money into companies that use sustainable practices, it sends a very important message to other companies that may not be as eco-friendly. Over time, as the companies that reduce waste and choose to use energy from renewable sources grow with the help of their investors, other companies begin to adopt sustainable and renewable practices that make the world a better place.
For many sustainable investors, it’s about personal convictions. The idea that we should leave the world a better place than we found it for future generations still rings true today. When people invest in companies that are actively creating technologies that preserve water, reduce energy consumption, or promote the use of sustainable materials, they can make a tremendous difference in the world.