Sustainable investing is a way of investing by evaluating companies on their environmental, social, and governance record, in addition to traditional ways, like looking at earnings and other financial factors. This type of investing has been growing rapidly, with a record number of new mutual funds launched in 2018, according to recent data by the US SIF: The Forum for Sustainable and Responsible Investment.
There are several reasons for this growth. First of all, as more people become aware of their impact on the environment and choose to engage in more sustainable, environment-friendly living, investors are also realizing they can match these same values with their investments. For example, someone who is committed to recycling and minimizing waste is likely to not want their investment dollars supporting the Environmental Protection Agency (EPA) violators. As investors become more educated about companies that are in their traditional investment portfolios, they realize some of these companies don’t align with their values.
A Focus on Positive Impacts
According to Morningstar, a global financial services firm, sixty-three percent of sustainable funds finished the year 2018 in the top half of their respective categories. Sustainable stock funds also held up better than their conventional peers in a negative market. These results encourage responsible corporate behavior, which can result in less negative externalities.
As more products become available that are managed in sustainable ways, investors are provided a larger range of choices. Not only were a record number of new funds launched in 2018, some existing funds have begun increasingly adding sustainability criteria to their process. Many exchange traded funds (ETFs), or an investment fund traded on a stock exchange, have begun in this same time frame. With more investment firms focusing on this movement toward lessening their environmental impact, there is more educational material on and promotion around sustainable investing. In a market where sustainable investing used to be concentrated mainly by institutions, there is now an uptick in investment choices for an individual investor.
Match Your Investment Dollars to Your Values
Sustainable investing is a way to match your investment dollars to your values. Historically, performance has shown that you don’t have to reduce your return expectations to invest this way. In 2019, numerous investment vehicles are available to individual investors through individual stocks and green bonds, mutual funds, and exchange traded funds.
To better understand how your investment dollars can contribute to the greater good and align with your values, please contact a Sikich Financial advisor for assistance in choosing the investment vehicle and company that is right for you.
Advisory services offered through Sikich Financial, an SEC Registered Investment Advisor. Securities offered through Triad Advisors LLC, Member FINRA and SIPC. Triad Advisors and Sikich Financial are not affiliated.
About the Author
JULIE KREHBIEL, CFP®
Julie Krehbiel provides financial planning and wealth management services to individual, corporate and not-for-profit clients for Sikich Financial. As a Certified Financial Planner, she specializes in matching clients values with their investments.