Sustainable investing has grown in popularity by offering investors the opportunity to support positive, pro-environmental practices while still earning returns. But if you don’t manage your portfolio with sustainability in mind, keeping track of your green investments can be difficult.
To manage a sustainable portfolio that aligns with your values, you need to consider multiple aspects to help you make informed decisions about which investments are right for you.
To begin managing a sustainable portfolio, consider the following six factors when researching potential investments.
1. Does the Investment Support a Cause You Care About?
Choosing investments that align with your values is important when managing sustainable portfolios. You can find sustainable investments that support causes you care about, including social justice, animal welfare, and environmental conservation.
For example, you can invest in renewable energy companies or socially responsible funds, which support programs, organisations, and initiatives related to clean energy and sustainability. Some sustainable investments are even geared toward specific causes. For example, you can invest in companies that support women’s rights, civil rights, and LGBTQ rights.
2. Your Risk Tolerance
The level of risk associated with your sustainable investments will depend on the type of sustainable investment you choose. Generally, sustainable investments are less risky than conventional investments since they are often tied to consumer goods and industries that have proven longevity.
For example, sustainable food and beverage companies will likely be more reliable than tech startups. However, every sustainable investment is different, so be sure to research to find a sustainable investment that aligns with your risk level.
3. Environmental Impact
When managing a sustainable portfolio, it’s important to consider the environmental impact of each potential investment.
Some sustainable investments may have a lower expected return rate than their conventional counterparts, but they also may have a lower level of environmental impact. For example, investing in utility company stocks may have a lower expected return rate than utility company bonds, but they also have a lower environmental impact.
To determine how environmentally friendly an investment is, you can look at the company’s carbon footprint and the ways they are reducing its impact on the environment.
4. Portfolio Diversity
When managing a sustainable portfolio, it’s important to diversify your investments to protect against risk. Managing sustainable portfolios that include unexpected investments with a lower level of environmental impact can help you maintain a diverse portfolio well-positioned to perform well in all types of investment conditions.
That said, it’s important to consider how your sustainable investments fit together to build a diverse portfolio managed with sustainability in mind. For example, you may want to include investments related to each other, like sustainable utility companies operating in the same industry. Or you may want to include unexpected environmental impact investments to diversify your portfolio.
5. Look At Company Culture
As you research sustainable investments, be sure to take a look at the companies behind the products and services.
To get a better idea of a company’s culture, you can research its mission and values and how it treats its employees. Visit the companies’ websites and social media platforms, and use online search engines to see what others say about the company.
Sustainable investment opportunities may also include companies that provide benefits to their employees, are committed to giving back to the community, or positively impact the environment. For example, investing in a company that offers a profit-sharing program for employees can help employees earn a living wage
When you manage a sustainable portfolio, you want to know how your money is being used and how it impacts the world around you. Invest in investments that provide information on their company structure, financial metrics, and operational practices.
This is important because it will help you make a well-informed decision regarding your investments,
Sustainable investing isn’t one-size-fits-all, so be sure to find investments that match your risk level, support causes you care about, and align with your values. With sustainable investing, you can earn returns while supporting a pro-environmental business model.
Note that managing sustainable portfolios is difficult, and it won’t always be perfect, but you can learn from your mistakes to make positive changes moving forward.