When I work with a client, I make it a priority to understand what is important to them. This helps guide our relationship and their financial plan. This often comes down to identifying what they value: spending time with family, traveling once a year, making a difference in the world etc.. We can stay true to our values in our day to day lives by being intentional with our decision making. What many people don’t know is that we can expand on this by being intentional with our investing choices too.
Investing is a crucial aspect for your future, whether it be for a specific goal or retirement. Besides giving yourself opportunity through the power of compound interest, you are allowing a company to use your money to fund their business ventures, so why not invest in companies whose values align with your own? Then, you know your money is benefiting not only the company but also helping solve different social issues.
Sustainable investing gives you the power to choose companies whose values and priorities align with yours.
What is Sustainable Investing?
Sustainable investing is the idea that you are investing in companies that look to combat different environmental and social issues while promoting corporate responsibility. This is a very high-level definition, and we can break it down even further.
There are three main areas that sustainable investing can focus on: environmental, social, and governance factors. By focusing on environmental issues, you’re focusing on combating issues that include climate risk, resource scarcity, and clean energy. Social issues can include diversity in the workplace, human rights, and cyber security. Companies who are concerned with governance tackle obstacles of business ethics, transparency, and corruption.
Why Choose Sustainable Investing?
Yes, financial gains are important for a company, but they also recognize that their investors care about more than just the bottom line. Investing sustainably does not mean you have to give up stock performance. With sustainable investing you are choosing companies who care about the impact they have in the world whether it be by implementing plastic free initiatives in their own processes or portfolios that invest in companies who are helping third world countries. You will know that your hard earned money is going towards investing in companies whose values and priorities align with yours.
Sustainable companies aim for both a strong financial performance while also focusing on ESG advancements and how they can do better. Sustainable investing has become increasingly popular over the last decade and could become the future of investing. It could also potentially identify different investment risks and generate higher returns. If more people become aware of the opportunity to invest in sustainable companies, it may challenge other companies to take on sustainable initiatives.
How to Invest Sustainably
Are you considering aligning your own values with where you’re investing your money? Great! It’s first important to understand what your priorities are before deciding where to invest your money.
Ask yourself: What is important to me?
If you thought of things in the realm of climate change and greenhouse emissions; this may mean you’d find value in the environmental sector of sustainable investing.
Here are 3 ways we can dive into sustainable investing:
1. Choose individual stocks – if you have a company that you’re a big advocate of, consider investing in them directly through the purchase of their stock shares.
2. Mutual Funds or ETFS – not sure what specifically to choose or want to diversify a bit more from just one or two stock holdings? Mutual Funds and ETFs are a great way to diversify among the ESG sector. You can go as broad as a board ESG mutual fund or ETF or get as specific as investing in Wind Power, Solar Energy or Gender Equality.
3. Portfolio Managers – Consider a portfolio put together by experts in the industry. Model portfolios are created and monitored by investment management professionals who are continuously monitoring their portfolios for winners and losers and to make sure their investment objective is being maintained. Portfolio Managers such at Litman Gregory, Nuveen, and Legg Mason all have social and sustainable model portfolios available and ready for investors.
Sustainable investing may be relatively new guidelines to investing, but companies taking sustainable initiatives and making an impact is nothing new. If you’re passionate about a social or sustainable cause, it only makes sense to put your money there to bring the most meaning to your life. If you’re unsure of where to start, or want to discuss further, reach out and I’m happy to chat!
Carolyn Rowland is a CERTIFIED FINANCIAL PLANNER™ passionate about empowering individuals to take control of their financial landscape. “We often tend to place our own priorities on the back burner for others, resulting in sacrifices we don’t often realize we’re making.”Carolyn believes in taking a values-based approach to financial planning. “Together we’ll define what matters most to you, what you want your life to look like, and develop a plan that fits your lifestyle.”CC
Carolyn Rowland is in the Milwaukee WI, area.