The world is facing significant challenges in the environment from both social and economic perspectives. Tackling these issues requires companies and governments to alter their operations and be more oriented toward improving these aspects. Investors can influence this a great deal by choosing to support sustainable enterprises.
Since 2012, there has been a significant increase in the clients’ funds flow into sustainability, thanks to investors. The increasing flow of funds is also courtesy of millennials undertaking investment decisions based on their values.
The overall goal of sustainable investment is to reap more benefits for society beyond business profits. Since its inception, a sustainable portfolio continues to offer the following benefits to society.
Individuals can Prioritize their Values
Initially, the strict screening of companies and industries made investors forego returns for their ethic-based investment decisions. However, this trend is changing with investors using ESG screening to create modern investment approaches.
The above shift contributed to the increase in sustainable investors as investors aim at generating returns with special consideration to impact. Through sustainable investments, companies can employ what they consider ethical in both their returns and impact and avoid those with detrimental effects.
Besides making society inclusive and the world a better place, a sustainable portfolio offers high investment returns. In one study conducted for Fidelity, an asset manager found that half of the sustainable investments outperformed the market.
In addition to the high returns, companies with a high ESG rating also enjoy increased share prices, which is helpful as most stock market investments comprise financial institutions.
However, the pension fund and institutional fund trustees lack this luxury as they have to abide by the fiduciary duty, acting in the investors’ financial interests. With the increasing returns on sustainable investments and their benefits to society, trustees will no longer sacrifice profits over sustainability.
Employment and Community Support through Sustainable Portfolio
Companies addressing the ESG social aspect have a stronger stakeholder focus. Such companies address the needs of their internal and external stakeholders and the overall impact the company brings. The companies will have stronger labor management internally and use their position to create awareness of diversity and equality.
A strong stakeholder will also be evident in their ability to meet their diverse customer needs, including the local community. The communities can also benefit through volunteering in the organization and donations.
Promotion of Sustainable Companies
A sustainable portfolio aims at promoting companies that promote human welfare and punishes those that could be causing severe health issues or even death. A sustainable portfolio will promote human existence and a safe environment in the long run by analyzing the values and ethics a business wants to employ in its operations.
A Sustainable Portfolio has a Positive Impact on Society
Sustainable investing is becoming a trend with investors embracing the ESG factors in selecting a company to put their money in. With such investments, there is a significant improvement in the market growth, hence a boost to the overall economy. Through direct employment and donations, sustainable investments also benefit their stakeholders and local communities. With more millennials venturing into this sector, the societal impact will be even more significant in the coming decades.