Want to grow your money while supporting the causes you care about? Sustainable investing allows you to do just that—invest in your future while contributing to a better world. Whether you’re curious about ethical funds, avoiding greenwashing, or choosing the right approach for your values, this guide will help you get started.
What Does Sustainable Investing Really Mean?
At its core, sustainable investing is about using your money to back companies that consider more than just profits. These businesses are working to make a positive impact on society and the environment, whether it’s tackling climate change, treating employees fairly, or fostering diversity in leadership.
Think of it as putting your money where your values are. If you care about the planet or social equality, your investments can reflect that. It’s like shopping for ethically sourced products but on a larger scale.
Here are some examples of the types of companies sustainable investors often support:
- Innovators in clean energy (solar power, electric vehicles)
- Employers who prioritise fair wages and safe working conditions
- Companies with diverse leadership and transparent business practices
- Organisations giving back to their communities
At the same time, sustainable investing often avoids companies involved in areas like fossil fuels, weapons, or industries with questionable human rights practices.
Different Paths to Sustainable Investing
There’s no one-size-fits-all approach, which is great because it means you can tailor your strategy to your goals and values. Here are three of the most popular frameworks:
1. ESG (Environmental, Social, Governance) Investing
This is the broadest and most flexible method. ESG investing scores companies based on how they treat the environment, their employees, and their governance practices. Think of it as a “well-rounded good citizen” approach.
But there’s a catch: ESG funds sometimes include companies that are strong in one area but weak in another. For example, a business with stellar environmental practices might fall short on employee rights. Staying informed about the criteria behind these scores is key.
2. Socially Responsible Investing (SRI)
SRI takes a more hardline stance. It focuses on excluding industries or companies that don’t align with your ethical standards—like tobacco, gambling, or fossil fuels. This approach is great for those with strong personal principles, but it may limit investment opportunities and growth potential.
3. Impact Investing
If you want to see measurable results, impact investing could be your path. This strategy prioritises investments that deliver specific social or environmental benefits—like funding renewable energy projects or improving access to affordable healthcare. It’s a more targeted (and sometimes riskier) way to drive positive change while seeking financial returns.
How to Spot Genuine Opportunities and Avoid Greenwashing
One challenge with sustainable investing is spotting companies that truly live up to their claims. Greenwashing, or falsely presenting products or funds as “sustainable,” can mislead investors. To avoid this, watch out for:
– Vague promises: Companies that use buzzwords without data to back them up.
– Over-the-top branding: A green logo doesn’t mean a green business.
– Misplaced focus: Highlighting minor achievements while ignoring larger issues.
To ensure your investments are truly aligned with your values:
- Review a fund’s actual holdings—not just its name or marketing materials.
- Look for clear, measurable goals in areas like carbon reduction or fair labour practices.
- Be aware that some funds include companies transitioning to sustainability, which may involve compromises.
Why Fees Might Be Higher—and Whether It’s Worth It
It’s common for sustainable funds to have slightly higher fees. Why? Because they require more research and active management to verify ethical practices.
Here’s how you can manage those costs:
- Compare fees across platforms: Look at the Ongoing Charges Figure (OCF) to understand what you’re paying yearly.
- Weigh cost versus value: If aligning your portfolio with your values is important to you, a slightly higher fee might be a fair trade-off.
Does Sustainable Investing Deliver Good Returns?
Yes, sustainable investing can be just as profitable as traditional approaches—and sometimes even more so. Here’s why:
- Companies with strong ESG practices often avoid risks like regulatory fines, worker strikes, or reputational damage.
- Forward-thinking businesses are better positioned to handle challenges like climate change and shifting consumer demands.
That said, sustainable investing isn’t immune to risks. Some funds focus on emerging industries or smaller markets, which can make them more volatile. Diversification remains crucial for balancing risk and reward.
How to Get Started with Sustainable Investing
If you’re ready to explore this approach, here’s how to begin:
- Define Your Priorities: What matters most to you—climate action, fair labour practices, or something else?
- Research Funds and Strategies: Dive into the options for ESG, SRI, and impact investing. Look for transparency and clear goals.
- Start Small: Test the waters with a portion of your portfolio before committing further.
- Stay Informed: Sustainable investing is a rapidly evolving space. Regularly review your investments to ensure they still align with your values.
Final Thoughts
Sustainable investing is more than a feel-good trend—it’s a way to align your financial goals with the changes you want to see in the world. Whether you’re focused on environmental sustainability, social equality, or good governance, this approach offers a way to grow your wealth without compromising your values.
Just remember: all investments carry risk, so don’t invest money you can’t afford to lose. Take the time to educate yourself, ask questions, and feel confident in your choices. After all, it’s your money—and your future.
Let’s build a future you can believe in, one investment at a time.
If you would like to speak to us, please do book a call.
Want to Go Deeper? Watch Our ESG Investing Webinar
If you’re thinking seriously about your future – your money choices matter now more than ever.
That’s why we hosted a recent webinar on ESG Ethical Investing – where we explored how to align your values with your investments. It’s essential viewing for those who want their pensions and portfolios to support a better future — for themselves and the planet.
Watch the replay: