What Is Sustainable Investing

What Is Sustainable Investing

Among the current generation of Gen Y investors especially, sustainable investing is beginning to take hold more and more. As people have become more conscious than ever about taking care of the world around them for their and future generations, sustainable investing has risen as an ideal to strive for when deciding how and where to invest their money. But what is sustainable investing, and why are people turning toward it en masse?

What Is Sustainable Investing?

Sustainable investing is any investment that considers any of three factors—environmental, social and governance (ESG)—and the companies that work toward these ideals. Sustainability of the company and its products and services is critical to these investment decisions.

For example, an investor might choose to invest in a solar energy company rather than an oil or gas company that may not be as dedicated to protecting the environment. An investor may choose not to offer any money to a company who does not pay fair wages to its employees.

In all of these ways, sustainable investing is a method by which investors can feel good about where they put their money as they support the causes that matter to them rather than only the companies that they feel will generate the highest profits.

Why Are More People Turning Toward Sustainable Investing?

Sustainable investing is becoming more popular among all generations, but one study from Spectrem’s Millionaire Center reported that 51 percent of Millennials consider socially responsible investments to be an important aspect of their decisions as opposed to 42.5 percent of Gen Y, 37.5 percent of baby boomers and 33 percent of WWII-aged investors. As the largest jump in these support averages is between Gen Y and Gen X, it is clear that sustainable investing is quickly gaining popularity in the current day and age.

Bigger name companies are also getting behind this movement. Apple CEO Tim Cook said in a recent meeting with shareholders, “If you want me to do things only for ROI reasons, you should get out of this stock.” Virgin CEO Richard Branson echoed the sentiment, “More businesses should be following Apple’s stance in encouraging more investment in sustainability. While Tim told sustainability skeptics to ‘get out of our stock’, I would urge climate change deniers to get out of our way.”

As more wealth is transferred from one generation to the next—$41 trillion from baby boomers to Millennials over the next 40 years as predicted by The World Economic Forum—sustainable investing will likely become ever more apparent in the financial industry over the next few decades. We will start to see a shift in the financial industry as well toward business and investment practices that suit a new generation of consumers and investors, breaking old archaic financial institutions that served previous generations but not necessarily the current one.

Sustainable investing is a huge movement that shows no end in sight. It’s being perceived as the right thing to do, as investors are now more than ever expected to invest in a purpose rather than just a profit. It will be compelling to see where this takes the global financial spectrum in the coming years.

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