Sustainable Funds 101: What are They and How to Invest In Them

Investors want to know that their money is being used to support companies and projects that align with their values. Sustainable investing allows investors to do just that by using their money to support companies and projects that are working to address social and environmental challenges. So, what exactly are sustainable funds? And how can you start investing in them? Keep reading to find out!

What are Sustainable Funds?

Sustainable investing, also known as socially responsible investing, is a type of investment vehicle focusing on companies that positively impact the environment and society. These funds typically invest in companies that adhere to environmental, social, and governance (ESG) standards. They may also exclude companies that engage in activities that harm the environment or violate social norms.

This means considering factors such as a company’s environmental footprint, labour practices, and governance structure when making investment decisions. Sustainable investors aim to generate financial returns and create positive social and environmental impacts by considering these factors.

There are many sustainable funds, including those focusing on specific industries or themes, such as renewable energy or gender diversity. Some funds use a more holistic approach, considering a range of ESG factors across all investments in their portfolio.

So How Do You Invest In Sustainable Funds?

●     Determine Your Investment Goals

Before investing in any fund, it’s important to determine your financial goals and priorities. Are you looking for long-term growth or income? Are you interested in supporting specific environmental causes? Understanding your preferences will help you select the right sustainable fund.

●     Research And Compare Sustainable Fund Options.

A wide variety of sustainable funds are available, so it’s important to research and compare different options to find one that aligns with your investment goals and values. Sustainable funds often use specific criteria to evaluate and select investments. These criteria may include factors such as a company’s environmental impact, diversity and inclusion practices, and governance structure. It’s important to understand the criteria of the fund you’re considering to ensure it aligns with your values.

●     Evaluate The Performance Of The Fund

While sustainability is an important factor to consider when investing, it’s also important to evaluate the potential performance of the fund. Look at the fund’s track record, historical returns, and risk profile to determine if it’s a good fit for your investment strategy.

●     Diversify Your Portfolio

As with any investment portfolio, it’s important to diversify your holdings to minimize risk and maximize potential returns. Consider investing in a mix of sustainable funds that focus on different industries to reduce your overall risk.

●     Monitor And Review Your Investments

Once you’ve invested in a sustainable fund, you must regularly monitor and review your investments to ensure they align with your values and investment goals. This may involve staying up-to-date on the fund’s performance and any changes to the sustainability criteria or portfolio holdings.

Summary

Investing in sustainable funds can generate competitive financial returns and align investors’ values with investment decisions. Sustainable funds are often compared to traditional investment funds, which tend to focus solely on financial performance. However, there is increasing evidence that sustainable investing can provide competitive returns.