• Definition 

• Sustainable investing, also called socially responsible investing or ESG investing, is a means of investing in which an investor strongly considers environmental, social, and corporate governance (ESG) factors before contributing money and resources to a particular company or venture. The goal is to, whenever possible, use investment dollars to promote positive societal impact, corporate responsibility, and long-term financial return. 
• Encourages companies to embrace sustainable principles, which provide social & financial gains long-term 
• The concept of sustainable investing is embodied in the idea of the triple bottom line (The triple bottom line is a business concept that posits firms should commit to measuring their social and environmental impact—in addition to their financial performance—rather than solely focusing on generating profit, or the standard “bottom line.” It can be broken down into “three Ps”: profit, people, and the planet.) 

• Elements 

• Environmental 

• Impact a company has on the environment, such as carbon footprint, waste, water usage/conservation, and clean technology used in its supply chain. 

• Social 

• Social impact an individual company or fund has within society & how it advocates for social good within the broader community. This can include a company’s involvement in social issues, the health/safety of its employees, and community engagement.  

• Governance 

• How a company is managed for driving positive change. This includes reviewing the quality of management, the board, executive compensation and its diversity, shareholder rights, transparency and even corporate political contributions. 

• Strategies 

• For each individual, sustainable investing can vary in strategy. It may mean researching every company they plan on investing in to ensure those companies’ missions align with their values or it could mean investing a select amount of money at a certain cadence into an ESG fund. 
•  Some “sustainable” portfolios only include positive-impact investments, while others simply exclude negative-impact investments. Still others use both inclusionary and exclusionary methods.  

• The various names (socially responsible, sustainable, impact) are often used interchangeably, without much consensus on which are exclusive, which are inclusive and which are both. That’s why it’s important to understand a fund or advisor’s methodology for choosing particular investments: Some may simply exclude investments in tobacco and firearm companies and call that portfolio “sustainable” or “socially responsible”  — without actually including any “sustainable” assets. 

• Key Takeaways 

• Sustainable investing is additive to asset management theory and does not mean a rejection of foundational concepts. 
• Sustainable investing develops deeper insights about how value will be created going forward using ESG considerations. 

• Sustainable investing considers diverse stakeholders, consistent with how companies are developing. 

A different perspective: 

• It’s also important to note that blindly following ESG scores can exclude investing in companies that can have a positive impact on the future with their innovations or necessary products but need the investments to evolve into a greener business model.