Today, we’re all familiar with the phrase investment, but few of us know what it means. For us, it implies putting money away in order to generate returns or earn a profit in the future. But it is much more complex than that. As a society, we invest in many ways, from our pension to our savings to stocks and bonds. Each investment strategy has its pros and cons. But an even more complex strategy is taking those investments and generating a positive social or environmental impact.
Sustainable, responsible, and impact investing (SRI) refer to techniques that help investors put their money to work in ways that make the world a better, more sustainable place. The investment world is trying to move beyond simply thinking about investment returns.
What is Sustainable Investing?
Sustainable investing revolves around prioritizing social and environmental outcomes. This approach involves allocating investments toward companies or funds that showcase positive ecological and societal contributions, adopting sustainable business models, and allocating a portion of earnings to initiatives supporting the environment (one great example could be the WWF Charity). Another avenue is to invest in entities that incorporate environmental impact tracking, measurement, and management into their core business strategies.
The core principle underlying sustainable investing is to veer away from supporting ecologically detrimental practices like mining, oil extraction, and deforestation, all of which bear adverse consequences for both humanity and the planet. In this regard, the concept of sustainable investing steps in to drive change. By realigning investment portfolios away from activities that pose harm and redirecting them towards endeavors that yield long-term benefits for both corporate entities and the environment, sustainable investing serves as a transformative force.
What is Responsible Investing?
Responsible Investing (RI) is a broad term that encompasses various investment strategies. While RI includes investments in companies, it also encompasses issues such as corporate responsibility and sustainability and investing for the long term. This commitment to RI is evident in various business sectors, where companies proactively allocate their financial resources to contribute to the betterment of the planet. A notable example of such businesses is green banks, which prioritize investments in renewable energy and actively work towards reducing the carbon footprint of the banking sector. If you’re interested in learning more about these sustainable practices, you can explore informative blogs like the one found at https://www.joinatmos.com/blog/corporate-social-responsibility-of-banks.
What is Impact Investing?
Impact investing is the key word here. Simply put, impact investing is investing with the purpose of generating positive social, environmental, or economic impact alongside a financial return. It is a method of investing that involves your money having a positive impact on society and the environment. Investing in nuclear power can be one such example. Uranium is a key fuel for nuclear power plants, and demand for uranium is expected to grow as more countries look to decarbonize their energy systems. In this sense, increasing Uranium Mining could support sustainable environmental growth by enabling the expansion of nuclear power as a low-emission energy source. This could create opportunities for investors who are willing to invest in uranium mining and production companies. When deciding where to invest your money, you have the option of choosing investments that align with your personal values, as opposed to simply looking for the best return.
For example, a food company is more sustainable and environmentally friendly than its competitors. Or a tech company that helps women earn an income or uses software similar to greenstone to keep their impact on the environment at a minimum. Or a nonprofit that’s funding new approaches to ending poverty. Impact investing may focus on for-profit companies or businesses owned by social or nonprofit entities. With many people looking for ways to build wealth without putting money into the stock market, it may be a viable option. It is a socially responsible investment philosophy. It is based on the belief that capital markets have a moral responsibility and should be leveraged for a positive impact on society, the environment, and the economy.
Hence, many financial advisors are advising their clients to stay focused on their long-term investments. Sustainable responsible and impact investing only began to gain critical mass in 2016. Investors are learning about the potential benefits to their bottom line. Additionally, many of them are concerned about the negative social and environmental impact of a “do nothing” approach.