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Sustainable investing: is it right for you?

Sustainable investments can take many forms, but they all share a common focus: companies trying to make a positive impact on the world. Adopting a sustainable investment strategy allows you to invest in alignment with your own values while also targeting financial returns.

Sustainable investing is a broad term that describes how an investor chooses companies in which to invest. In addition to companies that make a positive impact, this can also include companies with diverse workforces and community engagement. Investors consider an investment’s expenses, performance and other traditional metrics, as well as whether its business practices and sources of revenue align with own personal values. For example, if you care deeply about the treatment of animals, the advancement of marginalized groups, or protecting the environment, you would seek out companies that demonstrate those same values.

Environmental, social, and governance (ESG) investing vs. socially responsible investing (SRI)

Although many clients and Financial Advisors may use the terms sustainable investing, socially responsible investing (SRI), and environmental, social and governance(ESG) investing interchangeably, there are some nuanced differences that are important to understand when evaluating what is a good fit for you. One way to understand the difference is to think of sustainable investing as a broad term that includes both SRI and ESG.

ESG investing

By measuring an investment against an ESG framework, it can be easier for you to determine if the company includes any factors that do not align with your values. As you are doing research, take note if a particular company is involved with advocating for (or not supporting) the following areas:

  • Environmental: pollution, animal welfare, climate change, natural resource preservation, waste production and energy consumption
  • Social: child and/or forced labor, health and safety, community engagement, human rights, employee relations and stakeholder relations
  • Governance: conflicts of interest, board independence, shareholder rights, executive compensation, quality of management, transparency and disclosure

SRI investing

There are also negative factors or associations that may alert you to a company’s business practices. Knowing about these can help you decide whether your personal ethics would still align with investing or may have you screen specific companies out of your portfolio. Some examples of these factors include:

  • Firearms
  • Addictive substances like alcohol, tobacco and drugs
  • Environmental damage
  • Labor violations

Impact of sustainable investing on risk and returns

These ethically-focused investing methods have proven to perform just as well as traditional mutual funds. In 2022, sustainable funds’ AUM totaled nearly $2.8 trillion, increasing to 7% from 4% five years ago.

Some studies have also supported the fact that these investments also tend to be less volatile than traditional ones, even during volatile economic times. Data showed that during the first quarter of 2020, when the market was on a downward trajectory due to the COVID-19 pandemic, 24 out of 26 ESG index funds performed better than comparable conventional funds.

How to start investing sustainably: DIY vs. help from a financial advisor

_friends-sitting-down-outsideInvesting with a sustainability lens begins with determining those values that are most important to you. Once you narrow those down, the next choice you’ll need to make is whether you want to invest on your own or use a financial advisor.

The DIY route means that you’ll need to do everything yourself, starting with researching each specific investment to ensure that it upholds your values before adding it to your portfolio. Once you’ve built the ideal sustainable investment portfolio, you’ll need to monitor them closely over time to be sure that you’re getting the desired returns.

However, the time and knowledge required to do this can be intimidating. A Financial Advisor is not only able to efficiently research companies and monitor the progress of investments, but it’s likely that they already maintain a list of sustainable investments that is constantly updated.

Get started with sustainable investing today

It’s clear that sustainable investing is an investment sector to watch—ESG investing in particular is expected to more than double by 2025. Getting started now puts you in an advantageous position to capitalize on future growth. OnPoint’s team of Financial Advisors in Oregon and Southwest Washington can help you make these investment decisions and set up a portfolio that aligns with your values.

 

Disclosures

Securities offered through Raymond James Financial Services, Inc., Member FINRA/SIPC. Investment advisory services offered through Raymond James Financial Services Advisors, Inc. OnPoint Community Credit Union and OnPoint Investment Services are not registered broker/dealers or registered investment advisers, and are independent of Raymond James Financial Services, Inc. and Raymond James Financial Services Advisors, Inc.

Securities and investment advisors services are:

Not a bank or credit union deposit, obligation or guarantee.May lose value.Not FDIC or NCUA/NCUSIF Insured.Not insured by any federal government agency.

Raymond James financial advisors may only conduct business with residents of the states and/or jurisdictions for which they are properly registered. Therefore, a response to a request for information may be delayed. Please note that not all of the investments and services mentioned are available in every state. Investors outside of the United States are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this site. Contact your local Raymond James office for information and availability.

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members.

Any opinions are those of OnPoint and not necessarily those of Raymond James.  Expressions of opinion are as of this date and are subject to change without notice.  There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.  Investing involves risk and you may incur a profit or loss regardless of strategy selected.

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