With one dollar in every four going toward sustainable investing, putting your money where your values are can no longer be called a trend. A look at the demographic data makes it clear—more than two-thirds of millennials age 24 to 39 are interested in making an environmental and social impact with their investments, according to The Economist magazine (Oct. 24, 2020). Sustainable investing is also changing the future of business as companies and money managers realize that non-financial drivers have an enormous influence on their ultimate valuation.
There is no one-size-fits-all approach to sustainable investing. Before deciding which funds or investments are right for you, consider what kind of impact you’d like to make. Are you passionate about the environment? Eradicating poverty? Saving endangered species? Or perhaps you’re primarily focused on revenue but prefer to invest in companies that are good corporate citizens.
Both social and financial returns
Sustainable investing comes in many flavors, explains Kelly Frohsin, director, manager research, Investment Advisory Group. “Socially Responsible Investment funds (SRIs) tend to be exclusionary in nature, recognizing corporate responsibility and societal concerns with respect to investment decisions. Exclusionary SRIs can be thought of as socially responsible investing 1.0. As an example, religious institutions might use them to ensure their investment programs omit certain industries that are not consistent with the goals and teachings of that institution.”
ESG (Environmental, Social, and Governance) informed investing strategies, however, can be thought of as socially responsible investing 2.0. “Instead of omitting certain sectors, they actively pursue products or services that have shown a demonstrably beneficial societal impact,” says Spencer Boggess, managing director, alternative investments research, Investment Advisory Group.
Positive ESG scores have been linked to stock-specific performance. Thus, many businesses understand the value in managing certain non-financial factors to minimize costs and mitigate firm-specific risk, and in turn they seek to generate higher revenues.
In addition to SRI and ESG investing, you can express your values through impact investing and philanthropy. Through impact investing, you work closely with an advisor to create a custom portfolio that aligns neatly with your particular concerns and beliefs.
“With impact investing, whether it’s targeted toward green technology or improving access to healthcare, you expect a financial return—but more importantly, investors strive to create positive environmental, social, and governance-related change and long-term value,” says Frohsin. “With pure philanthropy, you are really looking to create a public good.”
Customize your approach
“Often, when we talk to clients about what they’re trying to accomplish, they want to leave a legacy—they want to impact the world,” says Boggess. “We can help our clients achieve their wealth goals because we have a broader perspective of how those goals map to their psychology, values, and intentions. And Truist has been walking that walk for a long time.”
Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money.
Kelly Frohsin, CFP®, CIMA®, Registered Representative, Truist Investment Services, Inc., Investment Adviser Representative, Truist Advisory Services, Inc.
Spencer Boggess, Investment Adviser Representative, Truist Advisory Services, Inc.