Why invest sustainably?

Sustainable investing has grown rapidly in recent years and this trend shows no signs of slowing down [1]. In the United States alone $20.9 billion was invested into sustainable funds during the first half of 2020, which is almost as much as in the entire previous year [2].

The demand for sustainable investments is being driven in particular by millennials who are nearly twice as likely to invest in companies or funds that target specific social or environmental outcomes.  This generation is about to inherit more than $30 trillion, which is expected to increase the flows into sustainable investments even further. [3]

It’s not just the individual retail investors though, in fact they only hold 27% of the sustainable investments [4]. Large institutional investors see sustainable investing as the future and fund companies are launching record numbers of sustainability-oriented products. So if you aren’t yet part of this trend, why should you start investing sustainably?

Sustainable investing

Investing sustainably means considering more than financial returns and aligning the investments you make with your personal values. Many believed that this approach inevitably meant sacrificing returns.

This however, does not have to be the case. Sustainability doesn’t come at the expense of profitability. In fact, sustainable funds actually outperformed their traditional peers both in 2019 and in 2020. Furthermore, their returns have been in line with their traditional counterparts in any given year from 2004 to 2018. [5]

Sustainable investing can also be seen as a form of risk management. Companies that don’t take sustainability into account are less likely to grow in the long term. Some may not even manage to stick around at all. On the contrary, companies that manage sustainability risks better tend to also manage other risks better and tend to be better-managed overall [6]. In fact, according to advisors, superior risk management is the top reason for their high-net-worth clients to invest responsibly [7].

Sustainable investing comes in many flavours. Join us next week to learn more about how to pick investments that best align with your approach to sustainability and see how Lehti can help you build a truly sustainable portfolio.

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