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What is Sustainable Investing?

Sustainable investing allows you to invest in companies that prioritise making a positive impact on the world.

From tackling climate change, to equal rights and animal welfare - you can select investment opportunities that reflect your values, while still helping you to achieve your long-term financial goals.

Why does sustainable investing matter?

Benefits to society

Investors are increasingly choosing to focus on sustainable funds as a way to help create a better world.[@schroders-link]

Your investment can help companies that support ethical business practices and environmentally-friendly innovations to develop and grow. This means you're not only investing in your own future, but investing in positive change and progress too.

Benefits to you

As an investor, it's natural to want to know more about exactly where your money is going. When you choose a sustainable investment fund, you can be confident that more of your money will be aligned with companies that are making a real difference.

Sustainable investing also recognises that the companies which contribute towards tackling major challenges such as climate change and global human rights issues could be in a better position to grow in the future. 

Is sustainable investing profitable?

It's absolutely possible to make ethically-driven investments and see a healthy profit at the same time. Environmental and societal issues can have an increasingly significant impact on a company's share prices.

Factoring these considerations into your investments could help you to:

  • reduce your level of financial risk

  • increase the resilience of your investments

  • deliver long-term capital growth

Companies that can create value for all stakeholders, including the environment and society as a whole, have consistently shown to be more likely to succeed in the long term, delivering stronger financial returns for shareholders and investors.[@stern-link]

With that said, it is still important to remember that the value of any type of investment can fall as well as rise, and there is no guarantee that you will get back what you invest. Sustainable investment should be seen as a medium to long-term commitment, meaning you should be prepared to invest for at least five years.

Types of sustainable investing

Sustainable investing can use a number of different methodologies, and may also be referred to as:

  • ethical investing

  • environmental, social and governance (ESG) investing

  • impact investing

  • socially responsible investing (SRI)

  • values-based investing

  • conscious investing

  • green investing

While they broadly mean the same thing, there are some key differences in the way they work, which may be important for you to know before you choose a specific investment strategy.

Let's take a closer look at some of the main approaches and what they involve:

Ethical investing

Ethical investing tries to actively avoid companies or industries that might have a negative impact on society and the environment. This is called negative screening. Sectors such as the tobacco industry, animal testing, gambling and oil and gas harvesting are typically excluded from this type of investing.

ESG investing

ESG investing actively selects companies that meet specific environmental, social and governance requirements. It is less restrictive than ethical investing, as it considers companies that are adapting their processes, such as oil companies that invest in clean energy. 

Impact investing

Impact investing actively selects companies whose positive impact on the world can be measured. For example, those who generate a specific amount of recycling or save a certain amount of water.

Sustainable investing at HSBC

HSBC uses the ESG framework to measure the level at which a company is tackling environmental, social and governance issues. 

ESG Framework Example Factors include
Environmental What impact does the company have on the environment?
  • climate change
  • air and water pollution
  • waste management
  • energy efficiency
  • water shortage
Social How is the company supporting its employees, clients and communities?
  • human rights
  • consumer privacy
  • gender equality
  • data security
  • health and safety
Governance How is the company governed or managed?
  • board structure
  • company ownership
  • financial reporting
  • business ethics and culture
  • executive remuneration
ESG Framework Environmental Environmental
Example What impact does the company have on the environment? What impact does the company have on the environment?
Factors include
  • climate change
  • air and water pollution
  • waste management
  • energy efficiency
  • water shortage
  • climate change
  • air and water pollution
  • waste management
  • energy efficiency
  • water shortage
ESG Framework Social Social
Example How is the company supporting its employees, clients and communities? How is the company supporting its employees, clients and communities?
Factors include
  • human rights
  • consumer privacy
  • gender equality
  • data security
  • health and safety
  • human rights
  • consumer privacy
  • gender equality
  • data security
  • health and safety
ESG Framework Governance Governance
Example How is the company governed or managed? How is the company governed or managed?
Factors include
  • board structure
  • company ownership
  • financial reporting
  • business ethics and culture
  • executive remuneration
  • board structure
  • company ownership
  • financial reporting
  • business ethics and culture
  • executive remuneration

How to get started

If you're considering sustainable investing, your first step should be to discuss your goals with one of our dedicated wealth specialists. They can help you to understand the fund options available and take you through the steps you'll need to take to get started. Premier customers should reach out to their Relationship Manager in the first instance. 

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