Myths Around Sustainable Investing
Our planet needs us more than ever. Not just because we are depleting it of all the natural resources, but we are on borrowed time, and it is on us to take the baton and pass it on perfectly well to the next generation. Not some polluted, dying, and unhealthy version of Earth but a sustainable one.
How do we do this? Of course, there are the convention methods. Still, it is the emerging strata of people interested in sustainable investing who will help significantly when it comes to corporates and the capital sector. The upcoming workforce belongs to the millennials, and they are grounded to the realities of the world. They are aware of the responsibility they have and thus, are embracing sustainable investing with full gusto. Their ability to not shy away from the hard truths and acclimate to change has put the trust in investment in sustainability.
Moreover, with a 107.4% growth recorded annually in the sustainable investment sector since 2012, things are brighter than it might look. (Source: https://www.ey.com/en_in/financial-services/why-sustainable-investing-matters )
If you are uninitiated on sustainable investing meaning, this blog is your primer on it. Read on for definition and myths of socially responsible investing.
What is Sustainable Investing?
Also known as socially responsible investing, impact, ethical or principles-based investing, sustainable investing aligns an investor’s personal goals and principles with three major factors when choosing an investment vehicle. These three factors are ESG – Environmental, Social and Governance. With the advent of companies focusing on creating environmental impact, broadening corporate social responsibility, and ensuring that its governance quality is holistic and transparent. All of this is helping in funding companies that are, for instance, creating green energy sources and renewable sources along with bringing substantial social revolution and change.
The aim of sustainable investing is to invest in companies with a high ESG score and wive handsome returns in the future. This shift in paradigm and the attitude towards sustainable investing has been gradual. However, many people are still holding back from SRI investing because of various myths that hold no power.
What are the myths abound Green Investing?
Sustainable investing is also known as green and socially investing. The first and foremost benefit of sustainable investing is that it helps put money in the hands of people who actually care about the environment and the social impact of governance and policies. This is not only the need of the hour but also aligns with the principles of millennials. This is why it becomes essential to bust a few myths that might tarnish an investor’s SRI investing perception.
1. Sustainable investments might not generate good returns
This is the number one concern among new investors who might potentially be interested in sustainable investing. However, this could not be far from the truth. As per a New York Life Investments Guide, sustainable investments tend to bring in excellent returns. In fact, in the past few years, companies with excellent ESG credibility have outperformed the more conventional ones. Thus, SRI investments are not only profitable but the road ahead.
2. Sustainable investing is a trend that will fade away
Another misconception that has steered many people away from sustainable investing is that it is a fad. However, sustainable investing has only grown in this decade and has been around for a long time. Moreover, ethically responsible investing has been a thing in the previous century, and sustainable investment is just a subset of it. Reports of Morningstar showed that investors opt for sustainable investing at an increasing rate as per extensive studies. Something like this is here to stay and much needed given the current world order.
3. Millennials and women are the only ones who do this investing
The younger generation happens to be more informed on sustainable investing because they are socially and environmentally more aware and active. But they are just a fraction of the significant sustainable investors out there. Moreover, the largest and the most considerable investment pool comes from people who run big corporations and funds; thus, the myth that only millennials care for sustainable investment is far removed from reality. The same goes for the stereotype that women are more into this. There are no studies that prove such gender biases.
4. Sustainable investing sticks or heavily prioritizes climate change and environment
Again, this happens to be a significant portion of what sustainability stands for, but the S and G are equally important and often interrelated when it comes to sustainable investing. Social impact and governance ethics and sound policies help the corporate sector and society as a whole. This is also a significant driver in an investor’s portfolio of companies they might choose to invest in. The idea of sustainable investing is about doing good while growing your money, which includes society’s interest from equal employment opportunities, diversification of workplaces to the proper healthcare system for the workers, and a lot that sustainable investing contributes towards this goal.
5. You need to allocate a huge amount of assets towards sustainable investing
This is the conventional thinking because 75% of sustainable investment comes from institutional sectors. Still, this number is changing rapidly. With more retail-based investments and passive funds becoming involved in sustainable investing, the premiums have gone down significantly allowed everyone to come forward and try sustainable investing. This diverse growth in the base is on an upward trajectory and will shape the asset growth.
We hope many misconceptions were cleared when it comes to sustainable and green investing because this is bound to grow by leaps and bounds, raise your money, and help society and the environment as a whole. As we said above, if your money can grow and do good, why not let it?