Sustainable Investing

Sustainable investing directs investment capital to companies that seek to combat climate change, environmental destruction, while promoting corporate responsibility.
Frequently Asked Questions
  • What is meant by “Sustainable Investing”?

    Sustainable investing is an investing philosophy wherein an investor takes a company’s environmental, social, and corporate governance (ESG) factors into account. This allows investment dollars to be used as a tool to promote positive societal impact and corporate responsibility without sacrificing long-term financial returns. Strategies for investing sustainably include avoiding companies that conflict with ESG principles and seeking out industries that are inherently more sustainable.

  • What are examples of sustainable investments?

    Following the environmental, social, and corporate governance (ESG) framework, there are a wide variety of investments that can be considered “sustainable.” Industries that promote good environmental practices, via more renewable energy sources or by combating air and water pollution, are perhaps the first things that come to mind for most people. However, sustainable investing can also include investing in companies that support human rights initiatives or a more ethical corporate culture.

  • Is there such a thing as ethical investing?

    For someone to invest ethically, they must use their ethical principles as the primary filter when selecting companies to invest in. What makes this different from green or ESG investing, each of which typically have an overarching set of guidelines, is that the criteria that make a company “ethical” can differ from one investor to another. For example, two investors who both value clean energy companies may disagree on whether or not nuclear energy qualifies as a “clean” source.

  • Is ESG investing profitable?

    A 2019 study of 11,000 mutual funds conducted by the Morgan Stanley Institute for Sustainable Investing found that there was no financial trade-off in the returns of sustainable funds compared to their more traditional counterparts. Additionally, regardless of the asset class held, sustainable funds also showed a significantly lower downside risk. Finally, during periods of high market volatility, sustainable funds generally proved to be more stable investments.

Key Terms

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Sustainable Investing

Page Sources
  1. Harvard Business School Online. "What Is Sustainable Investing?" URL: https://online.hbs.edu/blog/post/sustainable-investing

  2. HSBC UK. "What Is Sustainable Investing?" URL: https://www.hsbc.co.uk/wealth/articles/what-is-sustainable-investing/

  3. NPR. "Understanding the Promises and Limits of Ethical Investing." URL: https://www.npr.org/2022/01/11/1072207126/ethical-investing-with-esg-funds

  4. Morgan Stanley. "Sustainable Reality: Analyzing Risk and Returns of Sustainable Funds," Page 9. URL: https://www.morganstanley.com/content/dam/msdotcom/ideas/sustainable-investing-offers-financial-performance-lowered-risk/Sustainable_Reality_Analyzing_Risk_and_Returns_of_Sustainable_Funds.pdf