Knowing what sustainable business and investment is a first step. Actually going sustainable investing also seems a little less straightforward because “where do you start? We feel your problem and so we have briefly listed the options for you.
Green investing versus Sustainable investing
What we would like to emphasize is that “green investing” is not the same as sustainable investing. The difference here is that SRI, as we explained in a previous blog, has to do with a sustainability label
(ESG model
) and what the company is doing for environment, society and governance (
CSR
). Green investing has to do with investing in companies that are actively building wind farms or alternative energy, for example. Investing in green funds or “green” companies we can only applaud and is super good for the world but these are really two very separate things, keep that in mind.
Ways to invest sustainably
There are four ways to invest sustainably, namely investing in:
- Sustainable shares
- ETFs
- Sustainable funds
- Independent investment in sustainable projects
Sustainable shares
Investing in stocks always requires time and attention whether it is for sustainability or not. At the choosing your shares, because you want to know the financial situation and expected future of that company and what they are all “cooking up” in terms of business activities. When choosing sustainable stocks, figuring out the financial situation is just as important but you will have to do a little more research on business activities. After all, you want to know how that company scores on ESG policies. And we don’t just mean checking the ESG score, but it’s important to really delve into what those Environment, Social & Governance activities, which they are undertaking, are. You ask the question; what do they add in terms of environment, society and governance?
How about ETFs?
If you find choosing sustainable stocks difficult or just don’t feel like doing a lot of detective work, ETFs might be for you. ETFs are index funds, or a basket of stocks. There are a number of sustainable ETFs you can invest in such as:
- Lyxor Europe Socially Responsible theme ETF – ISIN: LU1940199711
- UBS USA Socially Responsible theme ETF – ISIN: LU0629460089
- UBS Asia Pacific Socially Responsible theme ETF – ISIN: LU0629460832
Note that an ETF i is a tack that tracks an index, and you can think of this index as a “basket of different stocks. There are several companies in such a fund, and that is exactly where the sustainability shoe pinches. Because an index consists of multiple companies (sometimes as many as 500), it is difficult to check whether each one is really as sustainable as they claim. Sure they have an ESG label received but we also know by now that such a label is mostly also a matter of checking boxes.
Sustainable funds
If you are really an investor of ‘the lazy kind’ then investing in sustainable funds at ABN AMRO, ASN or
Brand New Day
really your thing. No hassle, nice and easy and little to worry about. The difference with funds is that this is a fund put together by the provider. Brand New Day creates its own funds, and these funds include several ETFs, for example, to create the best possible ratio.
Daredevil investor?
One last option for the investor who is willing to take some risk is investing independently in sustainable projects. This can be done, for example, through crowdfunding or by investing in microloans for sustainable startups. Again, you need to be well informed and educated about what the project entails and what the financial risks are.
