|Sustainable investing, also known as socially responsible investing, is gaining traction in Ireland as more investors seek to align their values with their investment decisions. But what is sustainable investing, and how can investors identify sustainable opportunities in the market?
At its core, sustainable investing is the practice of investing in companies that prioritise environmental, social, and governance (ESG) factors alongside financial returns. ESG factors include a wide range of issues, from climate change and resource scarcity to labour standards and corporate governance. By considering these factors, investors can support companies that operate in a responsible and sustainable manner, while also potentially generating attractive returns.One of the challenges of sustainable investing is the jargon that surrounds it.
Here are some simplified explanations of common ESG terms:
Environmental: This refers to the impact that a company has on the natural environment. Environmental factors can include greenhouse gas emissions, water use, waste management, and renewable energy.
Social: This refers to the impact that a company has on people and communities. Social factors can include labour standards, human rights, diversity and inclusion, and community engagement.
Governance: This refers to how a company is managed and governed. Governance factors can include board composition, executive compensation, shareholder rights, and risk management.
So how can investors identify sustainable opportunities in the market? One approach is to look for companies that are leaders in their industries when it comes to ESG issues.For example, companies that have implemented strong environmental management systems or have a track record of positive social impact may be good candidates for sustainable investment.Another approach is to invest in funds or portfolios that have been designed specifically for sustainable investing. These funds typically screen companies based on ESG criteria and may also engage with companies to improve their ESG practices.In Ireland, sustainable investing is gaining momentum. The government has committed to becoming a leader in sustainable finance, and a number of asset managers and financial institutions have launched sustainable investing products in recent years. As investors become more aware of the impact of their investments, sustainable investing is likely to continue to grow in popularity.
In conclusion, sustainable investing is an investment approach that considers ESG factors alongside financial returns. By investing in companies that prioritise sustainability, investors can potentially generate attractive returns while also supporting positive change. As sustainable investing continues to gain traction in Ireland, investors have an opportunity to make a difference with their investments.