Sustainable Investing: A Socially Conscious Approach to Investing

Solar panels and windmills

Sustainable investing – also known as socially responsible investing, values-based investing or environmental, social and governance (ESG) investing – emphasizes environmental, social and governance considerations. Some people invest sustainably to align their portfolios to their values, while others may be aiming to encourage companies to be better corporate citizens.

Sustainable investing incorporates nonfinancial or indirect financial considerations such as the following.

Sustainable Considerations
Examples
Environment
Climate change, renewable energy, pollution, resource efficiency, water scarcity
Social
Alcohol, firearms, tobacco, diversity, labor relations, human rights, faith-based
Governance
Corruption, executive compensation, lobbying, board composition, board independence

Evaluating Sustainable Investments

If you’re considering sustainable investments for your portfolio, it’s important to understand how they may differ from traditional investment choices. The Edward Jones Mutual Fund Research Team identifies and recommends funds and investment strategies based on:

  • Investing advantage
  • Risk management
  • Continuity
  • Costs

Many sustainable investing funds don’t meet our standards within this framework. If you plan to build a portfolio with sustainable investment funds, it’s important to take into account the following:

  • Diversification, specifically if certain types of companies or industries are excluded from the investment universe
  • Length of investment process track record and tenure of management teams
  • Fund fees relative to current investments or funds recommended by Edward Jones Mutual Fund Research

What's your next step?

Keep in mind that many fund companies, including those Edward Jones Mutual Fund Research follows and recommends, integrate ESG considerations into their investment processes even if they’re not marketed as sustainable. Owning these types of funds could provide you with more options to construct a diversified portfolio.

Contact your financial advisor to find out whether sustainable investing makes sense for you.

Slavi Fildishev, CFA, Mutual Fund Analyst

Christine Sinicrope, Mutual Fund Analyst

Jonathan Woo, CFA, Mutual Fund Analyst

More Resources:

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