Your Guide to Sustainable Investing

Want to secure a sustainable source of income and returns? Look beneath the hood of your fund holdings to see how they score on environmental, social and governance factors

Emma Wall 30 July, 2018 | 3:27PM

Wind Farm - Ethical Investing

Do you want sustainable, long-term investment returns? Increasing evidence suggests that in order to reach your investment goalsthe companies that deliver the best returns to shareholders are those which care about ESG, about environmental, social and governance issues.

In the past, ethical investing was thought of as a lower-return strategy, investing for people who wanted to put morals above profits. But now evidence suggests that the opposite is true; companies which embrace low-carbon technology for example, are more likely to be future proofed, companies which treat their employees fairly are more likely to have consistent cash flows.

Morningstar Sustainability Rating

Morningstar introduced the Sustainability Rating for funds in 2016, a tool that helps investors to assess funds underlying holdings on environmental, social and governance factors. What is the rating, how does it work, and what is the benefit for investors? And does sustainable investing bring extra returns?

More than 34,000 funds currently have a Morningstar Sustainability Rating globally and that number is growing. This new rating was developed in cooperation with data supplier Sustainalytics.

Using the rating, investors can screen their existing portfolio and build a new portfolio based on sustainability criteria and select the sustainability factor they consider most important.

Why Morningstar Launched a New Way to Rate Funds

The Morningstar Sustainability Rating

Younger Investors Embrace Sustainability

Younger investors in particular are embracing ESG factors when selecting stocks and funds for their portfolio:

Millennials Lead Responsible Investing Movement

Barclays’ latest Impact Investing Report in July 2018, which surveys 2,000 investors, shows the number of investors that have made a sustainable investment has increased by two-thirds, to 15%, since 2015. However, this increase has been driven by millennials.

Articles and Videos on Sustainable Investing

How to Identify Good Governance in Emerging Markets

How to Pick an ESG ETF

Millennials Lead Responsible Investing Movement

Gun Crime Sets the ESG Agenda in 2018

How Can Investors Tackle Climate Change?

"My Ethical Investments Have Never Made a Loss"

5 Top Rated Funds For a Low Carbon Future

Why Should Investors Care About Climate Change?

How Passive Funds are Playing an Active Role in ESG

Can ESG Investors Halt Climate Change?

Which of the Oil Majors Will Ride the Renewables Wave?

 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author Emma Wall

Emma Wall  is Senior International Editor for Morningstar