Saving the planet and living sustainably is a message everyone is hearing loud and clear. Now you can invest sustainably as well – and do it profitably.
What is sustainable investing?
Sustainable investing is buying shares in companies that take seriously their impact on the environment and society. It sometimes goes by the name of ethical investing, socially responsible investing, green investing, impact investing and ESG (environmental, social and governance) investing.
Sometimes it might mean investing in green energy such as wind or solar.
The value of sustainable investing
Historically, sustainable investing hasn’t always equated with profitable or smart investing. But more so than ever, it is now not just an ethically responsible but an attractive prospect.
Recent research indicates sustainable funds are now outperforming traditional funds and pose less of a risk in bear markets. This has proven true during volatile times associated with the pandemic.
Impact investing is the practice of tailoring your investment strategy one of two ways.
A positive-impact portfolio looks to invest only in companies looking to have a positive impact on the environment, such as recycling, renewables, education or health care.
Alternatively, a portfolio can be set up to invest in companies that are carbon neutral while excluding those that have a negative impact on the environment, such as fossil fuels, weapons or tobacco.
ESG investing is a system to measure the sustainability of an investment based on three specific categories – environmental, social and governance.
Sustainable investments are often given a score using an ESG-based grading system considering all three categories.
If you are interested in an impact portfolio with a focus on protecting the environment, an investment with a high “E” score will be attractive.
How to get started
The basic principles of investing hold true regardless of which sector of the share market you are interested in.
You can buy shares directly online or through a broker. Or for a broader approach, a professionally managed fund is a great way to seek competitive returns while changing the world for the better.
But there are so many of them. Which one should you choose?
A lot of funds these days are claiming to be “sustainable” but many of them are just green with envy.
Greenwashing has become a big issue recently. Many companies and funds give the appearance they are economically-friendly when the reality is quite different.
It can take a lot of time and research to uncover any red flags about a company that purports to be green.
If you’re serious about investing sustainably, talk to your financial adviser and check your super fund to see where and how that money is being invested.
Get advice today
Whenever you are looking to invest, you need quality advice from an experienced financial planner, well versed in investment and wealth accumulation.
Buying into the sustainability of the planet is a great cause and can also be a lucrative one.
But ensure you do it with careful planning and a solid strategy.
Contact us today to discuss all of your investing and professional needs.
The information contained on this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
Taxation, legal and other matters referred to on this website are of a general nature only and are based on Nitschke Nancarrow’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.
Nitschke Nancarrow specialises in accounting, tax and financial advice for superannuation.
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