It has taken some time for the average investor to realize that sustainable investing is more beneficial than focussing on profit alone. In recent years, savvy investors have been turning to sustainable investing as a way to make help society, the environment and their bottom line. With this type of investment you can be sure your money is going towards projects and companies that are environmentally and socially friendly. It is based on the Principles for Responsible Investment which was created by the UN. If you’re looking for an easy and effective way to invest in sustainability, here are some guidelines for how you should go about it.
Some funds specialize in renewable energy sources such as wind or solar power, while others focus on sustainability by investing in electric cars, organic food companies and more. There are others which focus on carbon related projects, improving developing markets and providing infrastructure. What will you do with your money? Will you invest in sustainable funds? Or would you rather choose another option bonds? Whatever decision you make there’s no doubt it will help you make a difference!
- What is an ESG fund rating?
- How can you start investing in sustainable?
- How many ESG ratings are there?
- Which resources are available to help you invest in sustainable funds?
- What are the best sustainable funds?
- What are the best sustainable funds?
- What is the Socially Responsible Investment Organization?
- What is a sustainable investment fund?
- Do sustainable funds perform better?
- A list of 25 ESG Funds
- What is the Social Investment Forum Foundation?
- What are some tips from the foundation on how to invest responsibly?
- In conclusion
- Caveats sustainability funds and Disclaimers
What is an ESG fund rating?
ESG stands for Environment, Social and Governance. ESG funds invest in companies that perform well according to broad standards across these three main categories. They typically do not exclude any sector or geography and they don’t rely on screening stocks based on personal convictions. This type of fund may also be referred to as SRI (Social Responsibility Investment) and some are known as “green” funds.
How can you start investing in sustainable?
You can start by looking at the stock market and checking what investments are available. There are a number of companies that offer renewable energy stocks and sustainable mutual funds so you should be able to find a way to invest your money. If you want to see which companies perform well according to three broad standards across these three main categories than there is also the option of getting an ESG fund rating for free through many websites. This way you can get a feel for which companies are making an effort to be sustainable and invest in them!
One of the main benefits of investing in sustainable funds is that it allows you to diversify your portfolio while still getting exposure to companies that perform well according to broad standards across three main categories: environment, social and governance.
How many ESG ratings are there?
There are many ESG ratings there are on the internet, but for you to get a good estimation of how much it will cost to invest in sustainable funds you can calculate your “investable assets” which is different from your total assets. This is the amount of money that you have that you’re able to invest in shares and other things.
It’s important to know what size portfolio your targeting before looking at any companies. If it’s a small portfolio then you only need a couple of investments and if it’s a large portfolio you might want to find companies with larger stakes.
Which resources are available to help you invest in sustainable funds?
There are many resources available to help you invest in sustainable funds. If you’re looking for the most effective way than it’s probably searching through websites that offer an ESG rating or Sustainable Investment Survey. You can find these by doing a simple google search and you can see all the information about how much it costs and who offers the best ESG rating.
Another way to gain valuable insight into sustainable investments is to talk with an investment adviser that has knowledge of such funds. They might even be able to help you find a fund that’s right for you or your needs. Just like when looking at investing in a company it’s important to get information about how different funds can affect your portfolio.
Although investing in sustainable funds might seem quite complicated the truth is that the process isn’t very difficult. You just need to make sure you do your research and always get good advice from somebody who knows what they’re talking about!
What are the best sustainable funds?
The best sustainable funds are those that have highly positive ESG ratings. These companies, by rating high for environment, social and governance factors, are firms that are looking to be sustainable for the long-term rather than just short-term profits. It’s often suggested that you look at these ESGs as a form of diversification because they’ll offer your portfolio protection in case the market drops. The reason they provide this protection is because ESGs can go up when other companies go down.
The level of rating varies with each company depending on how socially responsible they are but some great options that receive top rankings include:
- Aberdeen New Dawn Fund (New)
- Goldman Sachs (New)
- BlackRock (New)
- Barclays (A)
- Standard Life (A)
Sustainable investment funds are available to everyone. You don’t have to be an experienced investor or a millionaire in order to invest your money in one of these companies, although it does help. If you’re interested in making a difference with your money then sustainable investing might just be the right place for you!
What are the best sustainable funds?
The best sustainable funds have a long history of positive returns in both up markets and down. They are led by managers committed to sustainable investing principles with low costs, strong investment processes, and have a culture of compliance.
For example, the most widely known sustainable fund is the Domini Social Equity Fund ( DSEFX ). It has won awards for its social performance, and has outperformed the S&P 500 with lower volatility.
What is the Socially Responsible Investment Organization?
The U.S. Socially Responsible Investment Organization (US SIF) is an association of investment professionals and financial institutions committed to using the capital markets to help create a more just and sustainable world, by identifying and investing in opportunities that meet strict social, environmental and corporate governance standards.
US SIF’s members manage approximately $8 trillion in assets, including mutual funds, closed-end funds, exchange traded products (ETPs), private equity and venture capital funds. In addition they work to promote social investor awareness among the general public.
What is a sustainable investment fund?
A sustainable investment fund (SIF) is a pool of assets that can be found within an individual’s portfolio. SIFs invest in companies and projects that contribute towards the sustainability of the planet. This means that they try to limit their negative impact on human society and natural resources. The underlying principle behind all SIFs is to help reduce global warming and protect the environment.
Whether you’re new to investing or a seasoned investor looking for something different, SIFs can provide you with an engagement opportunity to improve the world we live in. These funds allow their owners, and the wider community, to invest in companies that contribute towards positive change. This ensures that money is invested into sectors that are looking to make the planet a better place. It could be anything from renewable energy to recycling or even sustainable living!
Do sustainable funds perform better?
As well as making an impact on the community, SIFs can also bring about positive change for your portfolio by offering stability and low volatility. This allows you to trade more securely with less risk of losing your capital.
A list of 25 ESG Funds
- Vanguard FTSE Social Index Fund (VFTAX): is a mutual fund made up of “companies included in the FTSE4Good Index that meet high standards with respect to: environmental impact, corporate citizenship and governance”
- Calvert Global Alternative Energy Fund (CGASX): is a mutual fund that invests in companies involved in “alternative energy”, such as renewable energy and biofuels
- iShares MSCI KLD 400 Social ETF (DSI): is an index fund that tracks the Dow Jones U.S. Select Social Index “which measures the performance of large, medium, and small U.S. companies that meet high standards of social responsibility”
- WisdomTree Dreyfus Sustainability Fund (DFENX): is an index fund that “invests in companies managed to high levels of social and environmental responsibility”
- Barnard Small Cap Growth Fund (BSCGX): invests in small cap companies with sustainability investments.
- iShares MSCI USA ESG Select ETF (SUSA): is an index fund that invests in U.S. companies that “meet high standards with respect to the environment, social issues and corporate governance”
- Parnassus Core Equity Investor (PRBLX): invests in companies that are leaders in “environmentally friendly business practices”.
- iShares Global Clean Energy ETF (ICLN): is an index fund that tracks “companies involved in alternative energy, clean transportation, water purification and recycling”
- iShares MSCI ACWI Low Carbon Target ETF (CRBN): is an index fund that invests in companies across the world with low carbon emissions.
- Vanguard FTSE Social Index Fund Investor Shares (VFTSX): “invests in companies included in the FTSE4Good Index that meet high standards with respect to: environmental impact, corporate citizenship and governance”
- Shelton Green Alpha Fund (NEXTX): invests in companies that provide goods and services “that help people live more sustainable, healthy lives”
- 1919 Socially Responsive Balanced Fund (SSIAX): invests in companies “who seek to promote social and environmental benefits”
- Calvert Social Index Fund (CSIGX): invests in about 30 or so large cap companies that “meet standards for social responsibility” paid by the company’s employees
- AllianceBernstein Sustainable Global Thematic Fund (ATEYX): invests in companies that “have potential for growth and capital appreciation while helping to address environmental, social and corporate governance problems”
- Parnassus Core Equity Fund (PRADX): invests with large cap companies who are leaders in the environment.
- Spirited Funds/ETFMG WhisperRock Sustainable Energy ETF (WSK): is an index fund that invests in companies that provide clean energy, including solar energy and wind power
- AllianceBernstein Sustainability Core Fund (ACWAX): invests in the “largest and most liquid US-traded” sustainable companies.
- DWS Green World Equity Fund (DGRWX): is an index fund invested in companies that “perform well on environmental criteria”
- Vanguard Wellesley Income Fund (VWINX): invests in companies that are leaders in the environment
- Pax Large Cap Fund Institutional (PXLIX): invests in large cap companies that “enhance the standard of living for people and communities”
- Pax World Balanced Fund (PAWBX): invests in companies who are leaders in social responsibility, including climate change.
- Thornburg Better World International I (TBWIX): invests in larger companies that are leaders in social responsibility, including climate change.
- Pax MSCI World Index Fund (PAXWX): invests in the largest publicly traded companies across the world, but with an emphasis on social responsibility, including climate change.
- Green Century Balanced Fund (GCOBX): invests in companies who promote environmental responsibility, including climate change.
- Artisan Global Value Fund (ARTKX): invests in large cap companies that are leaders of the environment.
When it comes to SRI investing, it is no different from any other type of investing. The same basic rules apply:
- make sure you are informed of the investment you are making
- know how it is performing (i.e., doing better or worse than its competitors)
- do your research on that company to ensure that they are good-willed and their business will be profitable in the future.
What is the Social Investment Forum Foundation?
The Social Investment Forum Foundation is a national, non-profit organization working to promote responsible investment as a means of achieving social and environmental ends.
What are some tips from the foundation on how to invest responsibly?
One tip from the foundation is that sustainable investors have a longer time horizon than other investors. Environmental, social, and governance (ESG) issues take time to change.
Another tip is to vote with your wallets by asking companies the following questions:
- What are you doing to improve social and environmental conditions?
- How have these activities affected company profits?
- And how have they been divested from or changed over time?
In conclusion, this article briefly looks at ways in which you can make a difference through investing. It highlights different funds that invest in socially responsible companies, many of which are leaders in the environment, across the world. These funds aim to “provide investors with broad-based access to high quality companies that have strong records of financially profitable growth” and “offer investors the opportunity to make a difference, both in their portfolios and in the world.”
Caveats sustainability funds and Disclaimers
We have covered many topics in this article and want to be clear that any reference to, or mention of golden ball traditionally borne, celestial globe, terrestrial globe, word globe, planet earth, object shaped, adjective word origin, golden ball, celestial body, spherical body, electric light bulb, globe noun, celestial bodies, investment decisions, esg research, other celestial body, future performance, other astronomical body, company’s governance, small globe, wealth managers, french from latin globus, form into a globe, most investors, latin globus, glass fishbowl, old french, earth, sphere, form, investments, spherical, investors, word, research, around the globe, space, planet, object, heavens, words, map, noun, examples, sun, company, risks, shape, synonyms, definition, account, ball, dictionary, science, stars, gold, corner, planets, big names, future, subject, stocks, market, risk in the context of this article is purely for informational purposes and not to be misconstrued with investment advice or personal opinion. Thank you for reading, we hope that you found this article useful in your quest to understand ESG.
Research & Curation
Dean Emerick is a curator on sustainability issues with ESG The Report, an online resource for professionals focusing on ESG principles. Their primary goal is to provide resources to help middle market companies, SMEs and SMBs transition to a more sustainable future.