The concept of sustainable investing has been gaining traction over the last few years. More and more investors are moving away from companies that have a negative impact on the world, instead choosing to back those that are making it a better place.
There’s no doubt that sustainable investing is the right thing to do, but it can be difficult to get started on this path in your own personal investment portfolio. Many investors find themselves stuck between two options – you either invest in something you don’t believe in or avoid these investments completely.
If you want to encourage your fellow investors to practice sustainable investing, read our top 5 tips.
1. Help With Research
One of the most important steps towards sustainable investing is researching the companies you are considering investing in.
When helping fellow investors research a company, you want to ensure you are investing in one that is sustainable. Look into the company’s annual report, sustainability report, their website, and relevant news about the company.
2. Show Them How Sustainable Investing Can Help With Diversification
As always, diversification is a key element of sustainable investing. Any good investor knows you can’t put all your eggs in one basket. You want to spread your investment dollars across various industries that make the world better. You also want to avoid putting all of your capital into one particular type of investment.
Show your fellow investors how investing in different asset classes can help them if one industry experiences setbacks.
3, Help Them Look For Socially Responsible Funds
If you convince your fellow investors to invest in mutual funds and ETFs, you can help them find ones that focus on sustainable investing.
Climate change ETFs, for instance, focus on companies making the world a better place for humankind by reducing greenhouse gas emissions, finding non-carbon-based sources of energy, and reducing their own carbon footprint.
4. Let Them Know That Sustainable Investing Is a Long-Term Plan
Sustainable investing is long-term, and you need to be patient and ignore the short-term trends and fluctuations with traditional investing.
If one sustainable investment seems to be struggling to turn a profit, they might be tempted to jump ship. Instead, encourage them to use this to learn more about the company, its practices, and how it can become more sustainable.
5. Discourage Investments in Fossil Fuel Companies
One of the easiest ways to tell if a company is sustainable is if it produces fossil fuels. This includes oil, natural gas, and coal (although some companies are trying to use coal sustainably).
These fuels are not sustainable because we are running out of them, and they produce greenhouse gases causing climate change. You don’t want to encourage investors to put their money in fossil fuel companies because they are a dying industry. There are already cleaner and more sustainable forms of energy that are taking over.
The Bottom Line
Sustainable investing is the right thing to do. Fellow investors may find it a little more narrowing down on the right investment for their portfolios, but it will be worth it in the long run.
Not only will they be investing in companies benefitting humankind, but they might also enjoy higher returns as these companies grow.