What is the significance of sustainable investment? 

Sustainable investments include the application of environmental, socioeconomic and corporate governance (ESG) principles to investment decisions. The ESG criteria are listed in the following table. In the U.S., sustainable investments will account for a total of $8.4 trillion in US foreign-owned assets in 2021 using the most sustainable strategies in the business. Find out how.



What's the difference between ESG SRI and Sustainable Investment?


ESG, SRI, and Sustainable Investment are all related terms but have slightly different meanings.


ESG stands for Environmental, Social, and Governance. It refers to the three main criteria used to evaluate the sustainability and societal impact of an investment.


SRI stands for Socially Responsible Investment. It refers to an investment strategy that seeks to consider both financial return and social/environmental good to bring about a positive change.


Sustainable Investment refers to an investment approach that considers environmental, social and governance (ESG) factors to generate long-term competitive financial returns, while also benefiting society and the environment.


In summary, ESG is a set of criteria used to evaluate the sustainability of an investment, SRI refers to the practice of considering both financial return and social/environmental impact in investment decisions, and Sustainable Investment refers to an approach that seeks to generate financial returns while also benefiting society and the environment.



ESG, SRI, sustainability: They aren’t the same

You are correct that ESG, SRI, and sustainability are not the same.

ESG stands for Environmental, Social, and Governance. It is a set of criteria used to evaluate the sustainability and societal impact of an investment. It is often used as a framework for assessing a company's performance on a wide range of non-financial issues, including environmental impacts, labor practices, and community engagement.

SRI, or Socially Responsible Investment, refers to an investment strategy that seeks to consider both financial return and social/environmental good in order to bring about a positive change. It is a broader concept that can include various strategies like screening, negative screening, impact investing, and community investing.

The term "sustainability" describes the capacity to satisfy current requirements without compromising the capacity of future generations to satisfy their own needs. It is frequently used as a general word to include ESG and SRI. It can cover a wide range of issues, including environmental, social, and economic factors. In conclusion, SRI refers to the practice of taking into account both financial return and social/environmental impact when making investment decisions, and sustainability refers to the ability to meet present needs without jeopardizing the ability of future generations to meet their own needs. ESG is a set of criteria used to assess the sustainability of an investment.


Socially responsible investing, or SRI, definition

Socially Responsible Investing (SRI), also known as sustainable, socially conscious, "green" or ethical investing, refers to an investment strategy that seeks to consider both financial return and social and environmental impact in order to bring about a positive change. It is a broad concept that can include various strategies such as:


  • Screening: This involves investing in companies that meet certain social and environmental criteria, such as those that avoid certain industries (e.g. tobacco, weapons) or promote positive practices (e.g. renewable energy, fair labor practices).

  • Negative screening: This involves avoiding companies that do not meet certain social and environmental criteria, such as those that engage in controversial business practices or have a poor environmental record.

  • Impact investing: This involves investing in companies or projects that have a specific positive social or environmental impact, such as renewable energy or affordable housing.
  • Community investing: This involves investing in companies or projects that benefit specific communities or populations, such as microfinance or community development financial institutions.


The goal of SRI is to align an investor's financial goals with their values and beliefs. It aims to create a positive impact on society and the environment, while also achieving a financial return on investment.



Graduating to ESG investing


ESG (Environmental, Social, and Governance) investing is a type of investment in which environmental, social, and governance aspects are taken into account while making investment decisions. ESG investment is viewed as a subclass of socially responsible investing (SRI) and is a more sophisticated variation of SRI.


While SRI often focuses on staying away from particular industries or businesses that do not adhere to certain social and environmental standards, ESG investing goes a step further and actively searches for businesses that have great performance in these areas. This can include businesses that support good governance, have a positive influence on the environment, and have stringent labour and human rights standards.


Graduating to ESG investing can involve incorporating ESG factors into an existing investment portfolio by identifying and investing in companies that meet certain ESG criteria. This can be done by using ESG ratings provided by various research firms or by working with a financial advisor who specializes in ESG investing.


Another option is to invest in funds or portfolios that focus exclusively on ESG investments, such as ESG-focused mutual funds or exchange-traded funds (ETFs). This allows investors to gain exposure to a diversified group of companies that meet certain ESG criteria, without having to individually research and select individual stocks.


Graduating to ESG investing can be viewed as a method for investors to better match their financial goals with their values and beliefs, contribute to the shift to a sustainable economy, and have a beneficial impact on society and the environment.



Decide how much help you want

Your personal tastes and investment objectives will determine how much assistance you need when it comes to investing. Here are some options to think about:


  • Self-directed investing: If you enjoy making your own financial decisions and are knowledgeable about the market, you might want to give it some thought. To do this, you might conduct research on and select particular stocks, bonds, or other instruments to include in your portfolio.


  • Robo-advisors: You might want to think about utilizing a robo-advisor if you wish to invest on your own but lack the knowledge or time to research individual stocks. These are online platforms that build and manage your investing portfolio using algorithms depending on your objectives and risk tolerance.


  • Working with a professional financial advisor may be a good idea if you want more individualized guidance and assistance developing a thorough investment strategy. They can give you advice based on your objectives and risk tolerance and assist you in understanding your available investing options.


  • Funds that are only focused on ESG investments, such as ESG-focused mutual funds or exchange-traded funds, may be a good option if you wish to invest in businesses that meet particular ESG criteria but lack the time or knowledge to investigate individual stocks (ETFs).


In the end, how much assistance you require will depend on your personal preferences, investment objectives, and desired level of involvement in the investment process.



The future is ESG

Environmental, social, and governance (ESG) factors will become more important in the future of investment. Environmental, social, and governance factors are taken into account while making investment decisions through a practice known as ESG investing. Several causes, including the following, are responsible for the push towards ESG investing:

  • an increase in societal and environmental understanding of the effects of economic practices: There is an increasing need for investments that are consistent with people's values and beliefs as more people become aware of the effects that corporate behavior has on the environment and society.

  • There is growing proof that ESG investing has positive financial results, with studies demonstrating that these outcomes include improved long-term financial performance, decreased risk, and higher returns for companies with outstanding ESG performance.

  • Government and regulatory support: Governments and regulatory bodies around the world are starting to recognize the importance of ESG investing and are taking steps to support it.


  • Increasing availability of ESG investment options: As the demand for ESG investing grows, more investment options are becoming available, such as ESG-focused mutual funds, exchange-traded funds (ETFs) and robo-advisors.