As we mark Earth Day this month, it’s an opportune time to think about how to best incorporate sustainable investments into your portfolio. Let’s look at the numbers. By 2050, the world’s population is expected to increase by as much as 33 percent. This means in a few decades, there could be two and a half billion more consumers utilizing resources that are already limited. As living standards rise for people across the world, the global need for food, water and energy will increase at an even faster rate. It’s no wonder
that more and more investors are voicing their environmental sustainability beliefs or dissention via socially responsible investments – a trend that has surged in the past decade.
What is Sustainable and Impact Investing?
Sustainable and Impact Investing means investors are considering what’s called environmental, social and governance (ESG) criteria as part of their investment process. Whether their focus is on advancing environmental causes, building healthy communities or promoting corporate ethics, investors feel they can make a difference in the world through their investment choices.
Growth of Sustainable and Impact Investment Funds
According to US SIF (The Forum for Sustainable and Responsible Investment), assets in professionally managed sustainable, responsible and impact investments in the United States totaled $8.1 trillion in 2016 – up 33 percent from 1995. Furthermore, Morgan Stanley’s Institute for Sustainable Investing says this type of investing has experienced a 135 percent increase in assets under management since 2012.
How to Find Socially Responsible Investments
With more than 1,000 distinct funds, representing $2.6 trillion in assets that incorporated ESG criteria into their investment decision-making in 2016, there are many opportunities for individual investors to find suitable impact investment funds. A full spectrum of approaches is now available for all investors.
The Performance Question
Proponents of sustainable and impact investments have always had to combat the notion that these investment funds underperform when compared to the broader universe of investments. But there is a growing body of evidence that suggests otherwise.
Morgan Stanley conducted a proprietary study in 2015 to examine performance of more than 10,000 mutual funds and 2,800 Separately Managed Accounts over a seven-year period. The results showed that sustainable strategies often perform in line with, or better than, their traditional counterparts.
We, as investors, can all help drive positive environmental, social and governance outcomes by “voting” with our investment dollars. In order to create a successful sustainable investing plan, it is important for you to understand your personal financial goals and social motivations. Working with a financial advisor can help you understand and align these goals into a personalized investment plan that could have a real social impact.
Madison Carter is a Financial Advisor with the Global Wealth Management Division of Morgan Stanley in Denver. She can be reached at 303-316-5169. Email her at Madison.firstname.lastname@example.org or visit her website: https://fa.morganstanley.com/thecherrycreekgroup/.