Should you be rethinking your investment strategy?

Today’s investors are reviewing their portfolios and assessing what aspects of an asset may make it a good bet. Non-financial factors like sustainability and renewable energy commitments are being given more weight.

By Prianka Shah

January 19, 2021

Today’s active investors are looking at their portfolios and trying to decide what aspects of an asset may make it a good bet. News coverage, along with witnessing the effects first hand, makes it impossible for us to deny that climate change will not only impact the environment but also our livelihood and global economic growth. Applying non-financial factors, such as environmental, social, and governance (ESG) criteria, to their analyses is becoming increasingly popular and carrying more weight in their assessments.

 

EY found that 98% of institutional investors are moving towards a more stringent approach for evaluating a company’s ESG performance. Similarly, 85% of individual investors want sustainable investment options, according to a report from Morgan Stanley – but what are they doing?

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Investors are compelled to reassess their assumptions of modern finance as pressure mounts to move towards more sustainable energy sources and away from fossil fuels which damage our environment. A common misconception discussed at BlackRock’s Global Summit is that as investors we must trade our values for value.

 

However, sustainable investing does not force an investor to make that compromise. Forbes writes "renewable energy investments are delivering massively better returns than fossil fuels in the US, the UK, and Europe.” Looking specifically at the US, the renewable energy portfolio yielded higher returns than its fossil fuel counterpart over five and ten year periods and with less volatility during the past five year term. Smart investors have noticed that ESG and sustainable investing are big opportunities and are reaping the benefits in their returns.

Additionally, we are seeing that there is a move for hedge funds and asset management companies to provide more sustainable products to their investors. For example, to encourage individuals to invest in renewable energy, corporations have hosted summits to explain what sustainable investing is and how you can invest in sustainable investment solutions. BlackRock “has promised to screen all investments against sustainability criteria, and to begin divesting from companies such as thermal coal producers.” Certainly, seeing the world’s largest fund manager double the number of sustainability-focused exchange-traded funds it offers drives investors to change their strategy and mindset.

Online brokers such as Robinhood, E*Trade, TD Ameritrade, have made it considerably easier for individuals to become eager and active investors. However, they often do not provide the information that investors are looking for. Investors want to ensure that their money is making a difference in the world and not only to their portfolio returns.

 

GreenPortfolio is here to help you find sustainable investments that are right for you. Check out our recommendations for fundscompaniescredit cardsloansbanks, and nonprofits that allow you to find new ways to invest in solar, wind, and other renewables.

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