Sustainable investing (also known as responsible investing) has become increasingly popular recently, as investors look to invest their money in companies and people aspiring to make the world a better place. Many of these companies are involved in battling climate change, environmental projects and industry, and promoting corporate responsibility.
Sustainable investing is generally composed of three pillars: economic, environmental, and social. These can be broken down further into profits, planet, and people.
The first pillar, economic, is quite simple. People invest make their money grow. This is no different in sustainable investing. What differs is where they invest and what they feel comfortable investing in.
Where it can differ from everyday investing are the other two pillars, environmental and social. When it comes to environmental, it is again quite simple. Someone interested in sustainable investing would likely be averse to investing in fossil fuels but may be interested in sustainable energy such as wind, solar or tidal energy. We are not advocating one form of investing here. We are simply pointing out the differences.
When it comes to the social pillar, a sustainable investor may be interested in looking at how a company treats its employees and customers, what social projects they’re engaged in, and their record and stance on the environment. For example, a company engaged in wind energy creation may not check the box for the third pillar if they treat their employees poorly, don’t have a diverse hiring policy, or are found to put profits over people.