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What is sustainable investing?

Sustainable investing means investing in companies that aim to have a positive impact on the world.

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.

Why sustainable investing matters

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.  

Is sustainable investing profitable?

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:

  • reduce risk

  • 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.

Types of sustainable investing

Sustainable investing can use different methodologies and may be categorized in various ways, including:

  • impact investing

  • environmental, social and governance investing (ESG)

  • values-based investing

  • ethical investing

  • green investing

  • conscious investing

  • 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.

  • Ethical investing:

    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.

  • ESG investing:

    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.

  • Impact investing:

    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.

Sustainable investing at HSBC

HSBC uses the ESG framework to measure a company’s success in tackling environmental, governance and social issues.

HSBC's ESG framework

Theme Example Factors include:
Environmental What impact does the company have on the environment?
  • climate change
  • air and water pollution
  • waste management
  • energy efficiency
  • water shortage
Social How is the company supporting its clients, communities and employees?
  • consumer privacy
  • human rights
  • data security
  • health and safety
  • gender equality
Governance How is the company governed or managed?
  • board structure
  • company ownership
  • financial reporting
  • business ethics and culture
  • executive remuneration

HSBC's ESG framework

Theme Environmental Environmental
Example What impact does the company have on the environment? What impact does the company have on the environment?
Factors include:
  • climate change
  • air and water pollution
  • waste management
  • energy efficiency
  • water shortage
  • climate change
  • air and water pollution
  • waste management
  • energy efficiency
  • water shortage
Theme Social Social
Example How is the company supporting its clients, communities and employees? How is the company supporting its clients, communities and employees?
Factors include:
  • consumer privacy
  • human rights
  • data security
  • health and safety
  • gender equality
  • consumer privacy
  • human rights
  • data security
  • health and safety
  • gender equality
Theme Governance Governance
Example How is the company governed or managed? How is the company governed or managed?
Factors include:
  • board structure
  • company ownership
  • financial reporting
  • business ethics and culture
  • executive remuneration
  • board structure
  • company ownership
  • financial reporting
  • business ethics and culture
  • executive remuneration

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