Sustainable investing is becoming increasingly popular, going by the more than $18 trillion of investment capital currently managed using environmental, social, and governance factors in the U.S. The 200% plus growth since 2010 has come on sustainable investing firms such as The Altruist League, providing the much-needed insight and data that have encouraged the need for ESG investing.
The more than $18.7 trillion has mostly gone towards investments in green infrastructure, renewable energy, and affordable housing, given the growing need to impact the human race while also eyeing returns.
Amid the fast growth stocks, a cloud of confusion, doubt, and outright skepticism continue to curtail sustainable investment trends. Growth has mostly been curtailed by a string of sustainable investment myths that sustainable investing firms are being urged to do more to dispel.
Some of the myths of sustainable investments include:
1. Sustainable investing is about sacrificing returns
One of the most touted myths is that ESG investing is all about forgoing returns. There have been arguments that such investments cannot yield the same amount of returns as investing in fossil fuels, high carbon companies, or weapon companies.
Reality: Data shared by impact investment firms paint a completely different picture indicating that ESG investments generate comparable returns and often much higher than traditional investments. The S&P 500 and the MSCI KLD 400 Social index have historically perfumed similarly.
Echoing similar sentiments are The Altruist League’s Managing Partner Ekaterina Chernova, “Many asset managers are achieving outsized returns through sustainable investments. The investors are increasingly integrating sustainability data such an energy efficiency and carbon emissions in the effort of achieving outsize returns in the long run, similar to traditional returns.”
2. Sustainable Investing is Risky
Skeptics have always insisted that impact investing amounts to exposing one’s portfolio to more risk. Uncertainty gave that the segment is just but getting started has also been one reason most have stayed clear of such investments.
Reality: While Sustainable investing comes with a fair share of risks, they are not different from traditional investment risks. Any form of investment comes with the risk that any investor should have an idea of how to offset. While a good number of ESG investments have failed to live up to expectations, so have traditional investments also struggled in equal measure.
3. You can’t measure sustainable investments impact
Skeptics have always insisted that it is impossible to measure the impact of ESG investments as such investments are purely fads.
Reality: With impact investing, it is pretty possible to measure the impact one is making depending on its investments. Measuring impact is one of the requirements when it comes to sustainable investments. As we speak, many ESG investing firms are reporting the social and environmental impact they are having with their investments.
Likewise, sustainable investments cannot be a fad with more than $17 trillion of assets under management in the U.S.
4. Only Millennials are into Sustainable Investments
Stereotypes have always insisted on millennials the only ones betting big on sustainable investments. The skeptics have gone on to claim that the old guard has shunned the segment completely.
Reality: While millennials have been the driving force behind ESG investing growing popularity, they are not the only ones investing for a purpose. Investors of all walks of life and age are becoming increasingly interested in environmental, social, and governance impact with their investments.
According to The Altruist League’s President Milos Maricic, “Young investors are the catalysts behind sustainable investing growing popularity as they are twice as likely to put money in companies and funds that prioritize ESG issues. However, in terms of dollars invested, the primary investors are the old guard running the big institutional funds.”
5. Sustainable investing is all about investing inequities
There have been claims that all sustainable investments are directed towards equities and in combating climate change.
Reality: That’s not true as sustainable investing firms are increasingly offering investment strategies that work across various asset classes. Sustainable investing takes an inclusive approach thanks to impacting investing firms, offering insights into investing across multiple asset classes.
Some of the asset classes that are drawing a considerable amount of ESG funds include green bonds development band bonds and corporate bonds in addition to stocks.
Salman Zafar is a serial entrepreneur, digital marketer, writer and publisher. He is the Founder of Techie Loops