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Sustainable investment

Social and environmental change is happening faster than ever. Global warming and the
technology revolution are reshaping our planet. In this fast changing world, there are a growing
number of investors who want to understand how social and environmental change is affecting
their investments and how the way they invest affects the society and environment. Sustainable
investing involves considering more than just traditional financial analysis though. Sustainable

investing, also known as ESG investing or socially responsible investing, is the process of
incorporating environmental, social and governance factors into investment decisions (EY Global,
2020). More specifically, sustainable investing is a means of investing in which an investor
strongly considers environmental, social, and governance (ESG) factors before contributing
resources and money to venture or a particular company (VentureXchange, 2022). Individuals

who invest sustainably choose to invest in organizations, companies and funds with the purpose
of generating measurable environmental and social impact alongside a financial return (Berry,
T.C. and Junkus, J.C.,2013).
The idea is that those actively preparing themselves for future opportunities and risks by
recognizing their environmental and social impact will have better long-term prospects than those

that don’t. Their competence to generate sustainable financial returns should therefore be
superior to those that take a shorter term view (Schroders, 2020). Also, the issue of sustainable
investing has multiple aspects, all of which need to be considered if sustainability is to be
guaranteed. Impacts are spread across different sectors, from climate change and renewable
energy, to safety, health and community development. In other words, sustainable investing
ensures that firms aren’t judged solely on short-term financial gains but on a broader picture of

what and how they contribute to society at large (Harvard Business School, 2022). Also, at the
start of 2020, global sustainable investment reached USD 35.3 trillion in the five major markets
including Europe, United States, Canada, Australasia and Japan, a 15% increase in the past two
years (2018-2020) and 55% increase in the past four years (2016-2020) (Global Sustainable
Investment Alliance (GSIA), 2019). In summary, sustainable investing is about generating returns
that are sustainable into the future.

The importance of sustainable investment

It is clear that we are facing enormous challenges in the area of climate change and also from an

economic and social perspective. In order to successfully tackle these issues, companies and
governments will need to make drastic measures in the way they operate, and investors have the
authority to influence how they do this. From the largest asset manager to the smallest individual
investor they can decide to support sustainable enterprise. An increasing number of people no
longer select investments based solely on their ability to generate financial returns.

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