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

Explore Sustainable Investing

A woman checking a tablet by windmills on a farm
The Ethics of Investing
A statue of George Washington looks toward the New York Stock Exchange building on Broad Street from Federal Hall National Memorial on Wall Street in New York City.
What Is Stakeholder Capitalism?
Community Investing 101
Shariah-Compliant Funds: Definition and Examples
Two workers installing solar panels.
The 5 Countries That Produce the Most Solar Energy
Solar Energy: Benefits and Drawbacks
Oil Refinery at Twilight
What Are the Main Substitutes for Oil and Gas Energy?
Land Rehabilitation
Green Chip Stocks
Men installing solar photovoltaic panels
The Economics of Solar Power
Clean energy
4 Clean Energy Alternatives to Uranium
Earth from Space
The State of Sustainable Investing in 2021
An aerial view of flooded houses in New Orleans after Hurricane Katrina.
Portfolio Investing for Climate Change
Smoke Emitting From Cooling Towers Against Cloudy Sky
Carbon Trade: Definition, Purpose, and How Carbon Trading Works
Why You Should Invest in Green Energy Right Now
A workman in front of windmills
Investing in Green Technology
Best Wind Turbine Manufactuers
Wind Investments: How To Invest in Wind Energy
TGI
The Green Investor Podcast from Investopedia
Two entrepreneur hands holding heart shape of big tree and Earth globe of grass.
Guide to Green Investing
Sunrise in the Smoky Mountains
State Street R-Factor
The Robin Hood Foundation's 2018 Benefit
Venture Philanthropy
Dow Jones STOXX Sustainability Index
The Midsection of Businessman Working at Desk in Office
ISO 14001
The Midsection of Judge Pointing at Document While Worried Client Sitting on Table
Great Society
racial-justice-illustration-of-hands-in-protest
Racial Justice Investing
Environmental Engineers
Top Socially Responsible Bond ETFs for 2022
Person examines beauty products in cosmetics aisle.
Beauty Brands Tackle Greener Packaging
Stock Analysis
A New Approach to ESG Scoring
Data Availability Drives ESG Investing Surge
Social Choice Theory
Business Woman Thinking Account
Protest Divestment and the End of Apartheid
Solar panel photovoltaic installation on a roof of factory.
What Is Green Marketing? Definition, Example and How It Works
Heart and a bag of money on a scale
Ethical Investing
United Nations Economic and Social Council chamber, New York City, NY
UN Principles for Responsible Investment (PRI)? Definition
Finance
Top 5 Mutual Funds for Impact Investing
Windmills
Green Fund
Sinful Investing: Is It for You?
Excited friends gambling at roulette table in casino
Sin Stock
Paris Agreement/COP21
Business colleagues working in office using a tablet.
What Is an Islamic Investment Policy?
Sustainable Business 20 (SB20)
The Value in Socially Responsible Investing
Accountability for corporations must go beyond its shareholders
Corporate Accountability: Definition, Examples, Importance
Aerial view of photovoltaic plant
Guide to Socially Responsible Investments (SRI)
FTSE4Good Index Series
MSCI KLD 400 Social Index
Fishing boats, Port of Manta, Ecuador, South America
Fair Trade Investing
Leeds School of Business
Community Investing
Smoking chimneys
The 5 Countries That Produce the Most Carbon Dioxide (CO2)
A paper doll chain rests on top of a 401K statement and financial charts representing ethical investing concept
Impact Investing vs. Venture Philanthropy
Socially Responsible Investing Vs. Sin Stocks
Go Green With Socially Responsible Investing
Wahed Invest: A Look at the New Islamic Robo-Advisor
Oil refinery on bay in Washington state
Understanding the Basics of Mitigation Banking
Blue planet Earth in Businessman hands
Corporate Social Responsibility: Tracking the Top Trends
looking up at the sky and building with trees
How Did Johnson and Johnson's Corporate Responsibility Policy Pay Off in 1982?
Close-up of a stock market graph
Investing in Unethical Stocks: Pros and Cons for Traders
Austria, Tyrol, solar plant at evening twilight
Impact Investing Explained: Definition, Types, and Examples
Environmental, Social, and Governance (ESG) Criteria
What Is Environmental, Social, and Governance (ESG) Investing?

Sustainable Investing

Page Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  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