Future sustainability demands active engagement

Sustainable investing is a form of investment that takes into consideration environmental, social, and governance (ESG) criteria in order to create value for investors. This approach seeks to create positive returns by investing in companies with strong ESG practices, and pushing for positive change within those that don’t.

In this blog post, we will discuss what sustainable investing is, how it is linked to ESG, and why a sustainable future is dependent on it.

What is sustainable investing?

Sustainable investing, sometimes known as socially responsible investing (SRI) or impact investing, seeks to generate financial returns while also creating positive environmental and social impacts. This means that sustainable investments are made with the intention of not only generating financial returns but also contributing positively to society in terms of environmental protection or social progress. Drawing upon insights and ESG data, the practice evaluates risk and opportunities while tracking progress to ensure capital is allocated optimally.

How is sustainable investing linked to ESG?

These three aspects of ESG are used as a framework for assessing whether or not a company’s operations are sustainable from both a financial and non-financial perspective. For example, an investor may look at a company’s carbon footprint or its diversity policy when evaluating whether or not to invest in the company. By taking into account these factors, investors can make more informed decisions about which companies are most likely to produce long-term positive returns on their investments.

Why is sustainable investing important?

Sustainable investing has become increasingly important as investors look for ways to generate returns without compromising their values or sacrificing long-term stability of their investments.

Additionally, sustainable investments can help reduce risk by avoiding companies with poor ESG records or those exposed to certain negative externalities such as climate change or human rights abuses. As an alternative, investors can advocate for change from the inside through the process of engagement. Engagement has become the preferred mechanism for sound stewardship, with measurable impact achieved through long-term, objectives-driven and continuous interactions directly with senior executives.

Sustainable investments contribute positively towards achieving global goals related to climate change mitigation or poverty alleviation by supporting businesses engaged in activities that have a positive impact on society and the environment.

Sustainable investing has become an increasingly popular way for investors to generate returns while also making an impact on society and the environment. As more people become aware of the importance of sustainable investing and its potential impact on our world, this type of investing strategy has quickly grown in popularity. Climate crisis is just one of many factors contributing to this rise, which is only going to require greater attention and resources.

Scholars and practitioners alike agree that engagement between investors and companies has a positive impact on performance. Simplify dialogue and streamline data collection and tracking across your portfolio companies with SI Engage. Get in touch today.

 

Sign up for weekly insights, including SI Engage and industry news

Top