Sustainable or ESG (Environmental, Social, and Governance) investing has become a key pillar of many investment strategies. The popularity of ESG investing is driven by its alignment with personal values, a desire to mitigate risk, and the creation of mission-driven organizations. In addition to these qualitative factors, quantitative benefits like lower volatility and higher risk-adjusted returns.
ESG investing can be challenging for investors because it requires them to analyze a company’s non-financial metrics and financial performance indicators. It also requires analyzing the company’s environmental, social, and governance risks that may affect its future value.
Managing a Sustainable Investment Portfolio: Why It’s Positive
Sustainability is on everyone’s mind. Today, according to research, 72 percent of global citizens now believe that businesses can positively impact society. And as investor concerns about ESG risks increase, the demand for sustainable investing will continue to grow.
Therefore, managing a sustainable portfolio can help you achieve your short- and long-term goals. An ESG investment portfolio enables you to reduce risk, support your personal beliefs and align your assets with a sustainable financial plan.
Sustainable, responsible, and impact investing, or investing in an ESG fund, represents a growing segment of the investment world today. ESG has grown from a niche strategy into an essential piece of most investors’ portfolios.
The trend is likely to continue growing: According to a recent report, the ESG market could reach $11 trillion by 2030 as demand for sustainable products and services continues to grow.
Create a Game Plan
You must create a game plan to build and manage a sustainable investment portfolio.
Otherwise, how will you know whether you’re on track? What is your desired outcome?
You might also want to create a shortlist of your sustainability goals and what steps you will take to reach them. Doing so will help you define the sustainability issues most important to you.
Research Your Options
There are many options for sustainable investments, but it’s essential to do your research to find the ones that meet your investment objectives. To get started, ask yourself these questions:
- What is my risk tolerance?
- What are my values and beliefs?
- What is my time horizon?
- What do I want to accomplish – financially and personally?
Select the Right Investment Fund
Once you’ve answered these questions, you’ll be better equipped to select suitable investments. When seeking an ESG fund, answer the following:
- What are the fund’s investment objectives?
- What are the top holdings in the fund?
- What are the fees and expenses?
You’ll also want to find a fund that supports transparency. The fund should make it easy for you to access information about its holdings, performance history, expenses, and management team. Transparency helps you stay informed and make better sustainable investment decisions.
Some Final Thoughts
A sustainable ESG investment strategy is a great way to meet your investing goals while staying true to yourself financially and ethically. When putting together your sustainable investment portfolio, be sure to start with a plan that is as transparent as it is good for the environment and your investment goals and dreams.