A decade ago, sustainable investment was on the margins of investing opportunities, but fast forward ten years and investors insist on sustainable ways to grow their money. Unsurprisingly, these opportunities are growing more plentiful as big businesses recognize the need for it and the apparent direction of the markets.
What is sustainable investing?
The poet John Donne wrote that no man is an island entirely of itself; he then says that any man’s death diminishes him because he is involved in mankind. Of course, political correctness has changed somewhat since the 16th century, but his idea is both wise and true.
Humanity is interconnected in every way, including economically and politically. Sustainable investing recognizes this and seeks to change the world by investing in the right way. Put simply that means supporting businesses and industries with the most sustainable practices.
Why is the trend growing?
It might be misleading to refer to sustainable investing as a trend, as the sustainable investor and founder of Uzbekistan’s largest market Abu Saxiy, Timur Tillyaev, puts it, “Sustainable investment is not a short-term fashion, but a landslide shift in perception which recognizes the climate crisis as the most important challenge of our time.”
This is linked to a growing awareness that we live in a pivotal time, and our choices today will influence our children and society for many generations to come. That’s why investors nowadays want to ensure their investments are aligned with their values.
“For investors, it’s crucial that companies show an awareness of climate-related risks and develop strategies to mitigate them,” says Timur Tillyaev.
The importance of sustainable investing
The famous Karl Marx referred to capitalism as a “parasite” because it was a system that valued profit over people resulting in poverty. It also refers to the way the free market operates, always following consumer demands. But sustainable investment is something different.
Instead of capitalism creating a market for non-essential goods and services, sustainable investment is one example of consumers empowering themselves to change the nature of the markets. Thus, capitalism is not so much a parasite as an “A-moral system” that will also respond to the progressive demands of modern consumers.
How to become a sustainable investor
It’s easy to become a sustainable investor whether you invest formally in the markets or informally in your everyday lifestyle. But generally, when we think of sustainable investing, we are talking about supporting the large corporations making the most extensive efforts in sustainability.
To invest sustainably, start a portfolio of environmental, social, and governance funds (ESG); these are companies that have been audited, so you don’t have to research their legitimacy. There is already a huge variety of these funds on offer. As Morningstar’s director of sustainable investing research, Jon Hale, told CNBC, “There are now enough funds for anyone who wants to invest this way to have a full range of portfolio options” but if you want to research a company before investing, look at their record on environmental and social efforts.
Sustainability in all its forms is the future because without it the planet will run into a potentially existential crisis. While the free market is largely to blame for this, it might also offer a way out. You can say about the free market model that it is efficient and effective at finding solutions to problems. Investing sustainably could, therefore, be key in turning the tide on the environmental damage market growth has caused historically.