As investors continue to grow more aware of sustainable investing, there are a greater number of discussions happening around the topic.
Understandably, investors want to know as much as they can before making any investment decisions, but that can be challenging when truths are hard to discern from common assumptions. As with any topic in the realm of investing, it’s important to dig beneath the surface to separate fact from fiction.
If you’re curious about sustainable investing, read on to learn the truths behind some prevailing misconceptions.
Misconception #1: Sustainable Investing Isn’t Real Investing; It’s Just for People who Like to Feel Good About Themselves
Some investors are concerned that sustainable investing isn’t quite the same as traditional investing. After all, what could be wrong with the traditional system? How could viewing investments sustainably really make a difference?
Even though the idea of sustainable investing might bring images of popular green brands or alternative lifestyles to mind, sustainably-minded investing doesn’t have to be in opposition to other investment methods. Instead, what sustainable investing offers is a values-based way for investors to evaluate their portfolios and make shifts that align with their financial aspirations, as well as their personal code of ethics.
Depending on the investor’s goals and resources, sustainable investments might fit well into portfolios where other companies would not. And just because an investor chooses to consider sustainable investments for a portion of their portfolio, doesn’t mean that they have to rework everything. Every investor has different needs and should work to find a unique balance of that works for them.
Misconception #2: I Need to Choose Between Sustainability and Returns
Another common misconception about sustainable investing is that investors need to sacrifice returns in order to invest in brands that are truly sustainable. As it turns out, it’s possible for a company to be both sustainable and deliver potential similar returns over time.
A financial advisor can help you analyze your investment options for sustainability and other metrics important to portfolio design. This is why a close relationship with your advisor and transparency about your values and aspirations is so important in your investment conversations.
Misconception #3: Sustainable Investing is Just a Fad
There is a certain assumption that the conversation surrounding sustainable investing is just a fad. After all, sustainability in everyday life, from communities banning plastic straws to discussions over global conservation, is a trendy topic.
When it comes to sustainability in business, there is reason to believe that the practice of sustainable investing is here to stay. A big part of this is that sustainable investing isn’t actually a new concept; it’s just receiving a little more attention as sustainable practices are gaining more popularity in the public eye and businesses are dedicating more resources to sustainability.
Misconception #4: Sustainable Investing Holds Businesses to Certain Moral Standards
It used to be that ethically-minded investing naturally excluded certain “sin” industries, like tobacco and alcohol. But today’s sustainable investing is less about making a moral statement by withholding investments from “bad” companies and more about what a company is doing to make the world a better place.
Companies don’t have to adhere to a certain set of morals to be considered sustainable. And investors can choose brands that align with their values, even if the companies themselves might get an eye roll from an older family member.