sustainable investing

Understanding sustainable investing

Things to consider if you’re among the majority of Americans interested in this type of investing.

Chances are that if you’re an investor – whether in mutual funds, retirement accounts, or individual stocks – you’ve considered sustainable investing. The practice of investing your money in companies that adhere to certain principles or policies that align with your personal beliefs – think of issues like climate change or diversity – is one that is increasing in popularity among Americans, despite the ongoing volatility of the past several years.

According to the 2021 Allianz Life Sustainable Investing Study, nearly two-thirds (64%) of Americans currently hold a positive overall opinion on this type of investing. What’s more, many also are interested in taking action. More than half of the survey respondents (52%) who are not currently participating expressed interest in allocating funds to sustainable investments.

Interestingly, those who are already participating in sustainable investing are putting nearly half (46%) of their total investment portfolio toward companies adhering to sustainability principles.

So if you’re among those who have an interest in sustainable investing, what do you need to know?

1

Think about your goals.

A good place to start is to consider the issues that matter most to you. Consider the full range of environmental, social, and governance (ESG) issues that apply. It could be investments in renewable energy or even investments in the community. There is a lot to consider here, so it’s important to understand what matters most. Remember that while you want to put your money where you want to do the most good, you also likely want to grow that money.
2

Understand the investing process of financial services companies.

The study also found that there is a lack of understanding of how companies make decisions around investing. The study specifically looked at financial services and insurance companies, and found that only 52% of people understand how financial services companies make decisions about how to invest their money, and fewer (38%) are aware of specific financial services companies that successfully invest their assets in environmental sustainability efforts. Fewer understand how insurance companies make investment decisions (46%), or know any insurance companies successfully investing in environmentally responsible ways (31%).
3

Work with an investment professional.

Partnering with an investment professional can be helpful as you map out your sustainable investing strategy. They can help you understand the business practices of the companies that you may want to invest in. Of study respondents working with a financial professional, 69% say their financial professional should be doing this. Nearly three quarters (73%) say their financial professional should be making sure their portfolio is reflective of their values.