Putting your money where your mouth is.
An introduction to sustainable investments.
When you invest, you’re buying an asset and hoping its value will increase over time — your money helps a business grow, they share the rewards with you, and everybody wins.
You might be wondering, though, what your money is helping to grow. What businesses are you supporting, and what impact are they having on people and the planet?
Most importantly, do the businesses you’re investing in reflect your values?
How valuable are your values?
What is sustainable investing?
Sustainable investing is all about values — and if you want your money to do good in the world, then sustainable investing is for you.
Sustainability will define how businesses use natural resources and whether sustainability markers eg. renewables, are factored into decision making, how they support their community. Some businesses focus on output and production, with little or no consideration for their staff or the future of the planet.
Investing in businesses which only focus on output may help make you money but you may feel they come at too high a cost when it comes to your beliefs and view of the world. Many investors today are looking for a triple bottom line framework whereby social, environmental and financial considerations are taken into account.
What’s the bottom line?
Are sustainable investments worth it?
Sure, you might be thinking, that’s a nice thought, but that’s just how the game is played: either you can stick to your principles, or you can earn some money, but you can’t do both — right?
Well, no. Sustainable investments are worth not billions, but trillions around the globe — and while there are always risks involved in any investment, sustainable or not, there’s evidence that companies who score highly on sustainability issues can even outperform those that don’t.
What’s in a name?
Sustainable, Ethical, Impact Investing.
Out in the wild, sustainable investments go by many names: sometimes businesses and investment funds talk about “ethical investing” rather than “sustainable investments”. They might mention “impact investing”, or they might refer to “ESG”, which is a measure of how a business impacts the Environment and Society, and of Governance — that’s the way the business is run.
A word on greenwashing: You’re sure to see “sustainability” being thrown around like a buzzword, even when you can’t quite pin down exactly what someone means when they say it — if a business is talking the talk, make sure you have evidence that they’re also walking the walk.
It doesn’t matter what they call it — what really matters is what a business or an investment fund is doing with your money. Are they focusing on the impact your money will have on people and the planet? Are they doing it in a measurable way, and are they being transparent about the results? If the answer’s yes, it doesn’t matter what they call it — it means you can rest easy knowing that your money is being used in a way that’s consistent with your values.
How is it done?
How do you invest sustainably?
There are different ways to invest sustainably. If you’re doing it yourself, picking the companies you want to invest in directly, your best bet is to assess each business individually. Get to know their business practices and operations, and what impact they’re having on the environment and on society at large.
If you’re investing through a fund or a broker, you should research their attitudes towards sustainability and how they pick the companies they invest in. Find out which businesses they’re investing your money in, and whether or not they have any ethical or sustainable investment options available.
You can usually find information on the websites of businesses or funds you’re looking into, or by asking over the phone or by email. You should look into what sort of criteria they have, if any, for assessing sustainability, and for measuring environmental and social impacts.
Look out for fund reviews too — there are so many independent sources who take the time to look over the sustainability of different investment funds so you don’t have to. Don’t take everything you read at face value, but the better informed you are, the better you’ll be able to find investment options that are right for you.
What are your ‘investing values’?
To help you assess whether a business or investment fund is in line with your values, here are some questions to ask yourself — and to ask of a business or fund you’re investing with.
- Does the fund offer a sustainable and/or ethical investment option?
- What industries does the fund invest in?
- Do they provide a breakdown of investments by industry?
- Are you able to specify which industry/ies you do and do not want your money to be invested in?
- Does the fund or business offer regular reporting on their environmental and social impacts?
- If so, are the criteria they use clear, relevant, and verifiable?
- If not, why? Can you find out more by getting in touch by email or by phone?
- Is the business/fund open and transparent about their business practices and processes?
- Has the business/fund won any awards or been featured in any reviews for purposes of sustainability?
- HSBC - Sustainable Investing
South Africa specific