From tackling climate change, to equal rights and animal welfare, you can factor your values – as well as your financial goals – into your investments decisions.
Investors are increasingly choosing sustainable funds, recognizing that they can help companies, societies and even nations to develop, innovate and grow.
Through companies that are trying to make the biggest difference, you can invest in positive change and progress, as well as your own future.
Sustainable investing also acknowledges that companies aiming to solve the world’s biggest problems could be best positioned to grow.
It’s possible to make a profit while investing with a conscience.
Environmental and societal issues can impact share prices, so considering them in your investment choices could help:
deliver long-term capital growth
make your investments more resilient
Companies that create value not only for shareholders but for the environment and society too, are more likely to succeed in the long term, which should result in stronger financial returns.
But, remember, the value of any type of investment can go down and you might not get out what you put in.
Sustainable investments should be seen as a medium to long-term commitment, so you should be prepared to invest for a minimum of 5 years.
Sustainable investing can use different methodologies and may be categorized in various ways, including:
environmental, social and governance investing (ESG)
socially responsible investing (SRI)
There are similarities between the categories, but also key differences in how they work, which are important to know before you choose how you’re going to invest.
Here’s a summary of some of the most common approaches and what they involve.
Tries to actively avoid industries or companies that might have a negative impact on the environment or society. This can be called ‘negative screening’. Excluded sectors would typically include: tobacco, animal testing and oil and gas.
Actively selects companies that meet specific environmental, social and governance requirements. It’s less restrictive than ethical investing, as it considers companies that are adapting, such as oil companies that invest in clean energy.
Actively selects companies whose positive impact on the world can be measured. For example, those companies that save a certain amount of water or generate a specific amount of recycling.
HSBC uses the ESG framework to measure a company’s success in tackling environmental, governance and social issues.
|Environmental||What impact does the company have on the environment?||
|Social||How is the company supporting its clients, communities and employees?||
|Governance||How is the company governed or managed?||
|Example||What impact does the company have on the environment?||What impact does the company have on the environment?|
|Example||How is the company supporting its clients, communities and employees?||How is the company supporting its clients, communities and employees?|
|Example||How is the company governed or managed?||How is the company governed or managed?|
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