Guest post by Amy Buttell
When I heard that my friend Wendy Green was hosting Francie Heller, a sustainable investing expert, on her Hey, Boomer! show, I was intrigued. Having lived in Greenville, SC from 2014-2018, I knew of Francie’s parents and the integral role they played in developing Greenville. As a writer in the financial services arena, I wanted to know more about Francie’s take on sustainable investing, so I tuned into the show. Wendy asked me to write up a bit of information on this topic, given my background, so I’ve dug up the latest on sustainable investing, which I hope will help you learn more about this fascinating topic.
In an effort to both grow their assets and drive corporate sustainability, U.S. consumers increased their investments in sustainable investment vehicles by 50 percent between 2018 and 2020, according to the Forum for Sustainable and Responsible Investment’s 2020 Trends Report. That translates into $4.6 trillion invested by retail and high-net worth investors during this period.
Sustainable investing includes assets invested according to a wide variety of environment, social and governance goals. Also known as ESG, these objectives are designed to encourage publicly traded companies to conduct business in a sustainable manner by acting in an environmentally-responsible way, prioritizing diversity and inclusion and abiding by strong governance standards.
If you’re interested in sustainable investing, there are a wide variety of mutual funds and exchanged traded funds that operate based on sustainable principals. The first step is to decide what types of sustainable issues you are interested in, which include:
- Pollution and waste
- Climate Change
- Diversity and inclusion
- Gender equity
- Data privacy
- Human rights
- Fair wages
- Community improvement
- Ethical behavior
- Strong governance
Once you’ve established your goals as a sustainable investor, you can decide how much of your investments you want to allocate to sustainable investing. Because sustainable investing tends to offer competitive returns with non-sustainable investing options, you may want to invest the bulk of your assets in this way. Or you may wish to devote a portion of your portfolio to this type of investment, at least at the beginning.
If you’re mostly invested through your company-sponsored retirement plan – in other words, a 401(k) – your options are likely limited because the company that you work for chooses those options. However, you could ask your Human Resources Department to add mutual funds with sustainable investing objectives to the menu of options in your 401(k) plan if a sustainable option isn’t already available.
There are many sustainable mutual funds and exchange traded funds that offer sustainable investing in a more general or generic way. That means that they might call themselves environmental or socially responsible investing funds, but they might not be invested in the specific issues that you’re passionate about. Other funds are invested very specifically in areas like clean energy or sustainable water.
You can invest directly in sustainable mutual funds or ETFs through a financial services company such as Vanguard, Schwab or Fidelity or through a financial advisor. Either on your own or with the help of an advisor, you’ll need to decide whether you want to invest in stock funds or bond funds. Within the larger universe of stocks, you will also need to decide what types of companies you want to invest in, such as small, medium or large-cap companies and U.S. or foreign companies. Same for bonds – you’ll need to consider corporate bonds, government bonds and U.S. and/or foreign bonds.
To learn more about sustainable investing, check out these resources:
- Getting Started in Sustainable Investing by the Forum for Sustainable and Responsible Investment
- Welcome to the New Sustainability: Where Success Meets Personalized Impact by Morningstar