Sustainable Investing

Learn More About This Sought-After Financial Strategy with Watt Wealth Management in Denton

It’s time to pursue goals beyond financial growth.

If you’re looking for ways to make a positive impact on society and the environment, it’s time to consider sustainable investments. At Watt Wealth Management, we help residents of Denton invest their finances in ways that align with their values and the things they are passionate about. Sustainable investing benefits charities and causes without return or income consideration. If you feel your wealth has a greater purpose and can make an impact in your community or for the causes that you support, sustainable investing is your answer. Get in touch with us at Watt Wealth Management in Denton today.

Benefits of Sustainable Investing:

Make a positive impact on the environment or your community
Support a cause that you love
Improve risk and return characteristics of your portfolio
Avoid ties to questionable activities
Utilize a powerful tool in addressing global challenges

Sustainable investing, an approach that integrates environmental, social and governance (ESG) criteria, is becoming a much sought-after strategy in the financial industry. Whether implemented through socially responsible investing (SRI) screening, ESG integration or impact investing, sustainable investing offers a growing number of options for investors interested in pursuing goals beyond financial growth when building their portfolios.

What Is It?

Through sustainable investing, not only can investors aim to make a positive impact on society and the environment, they can potentially improve the risk/return characteristics of their portfolios by factoring environmental, social and governance (ESG) criteria into their investment decisions.

Objectives:

Encourage positive environmental, social, or governance practices.
Align investments with personal values.
Potentially improve portfolio risk/return characteristics.

Desired Outcomes:

Whereas conventional investing is focused on risk/return, and philanthropy seeks solely to benefit charities and causes without return or income consideration, sustainable investing looks to accomplish both in varying degrees along a spectrum of possible outcomes.

What Are The Approaches?

While there is a common theme of pursuing a greater purpose, there is much variety within sustainable investment strategies, particularly in how they are implemented. Implementation generally takes the form of one or more of the following approaches:

Exclusionary Screening:

Viewed as the original approach to “responsible” investing.
Also known as socially responsible investing or negative screening.
Excludes individual companies or entire industries from portfolios if their activities conflict with an investor’s values, such as fossil-fuels, gambling, or alcohol.
Limits investable universe, which could impact diversification.

Integration:

Combines ESG criteria with traditional financial considerations.
Gaining momentum as portfolio managers consider ESG themes in their decision-making process.
Sometimes implemented as a best-in-class approach by identifying and investing in companies that are the best ESG performers within a sector or industry group.
A study conducted by the CFA Institute cites integration is the most commonly used method.

Impact Investing:

Aims to have a social or environmental impact alongside financial return, with a focus on intentionality and measurement of impact.
Ranges from grant support to private equity; liquidity risk and return target can vary dramatically.
Most common products are funds invested in private equity and venture capital.
Accredited investors and funds are the leaders in impact investment by asset level.

Other Dimensions:

Thematic Investing – focuses on a specific ESG theme, and structures a portfolio around companies or industries that support that theme.
Shareholder Engagement (Activism) – actively engages with a company, directly working with management or exercising shareholder rights to effect change.

1 CFA Institute, “ESG Issues in Investing: Investors Debunk the Myths.” 2015

2 Global Impact Investing Network, “What You Need to Know About Impact Investing,” https://thegiin.org/impact-investing/need-to-know/#s2

Why Should You Consider It?

The paths to pursuing effective global stewardship and possible growth are coming together in the investor mindset. Sustainable investing, when incorporated into a well-defined, long-term investment plan, can be a powerful tool in addressing global challenges while pursuing personal financial goals.

Investors may consider sustainable investing for a host of reasons:

Risk Mitigation: Companies that ignore their social and environmental impacts may face regulatory and governance risks.
More conscious approach to investing: Investors may aim for a positive impact or avoid ties to questionable activities.
Long-term performance: Companies with a negative reputation or poor business practices may not be sustainable.
Align investing with personal or religious views: Investors may not feel comfortable investing in companies whose business practices they view as morally objectionable.
Fiduciary duty: Professional asset managers have a responsibility to invest within certain standards that represent their clients’ interests, which would likely make investments in companies with unsustainable practices less appropriate.