Does Sustainable Investing Cost More?

Sustainability seems to be having a moment. From earth-friendly fashion and regenerative farming to making sustainable choices with your investments, the concept of avoiding depleting our natural resources is everywhere. But what exactly does it mean to invest sustainably, and is there a higher price point to invest in a way that makes a positive difference in our world? Keep reading to learn more about this type of investing, whether it costs more, and if it’s the right choice for you.

Profit with Purpose  

Sustainable investing enables you to align your money with your values. Also known as ESG investing, which stands for environmental, social, and governance, it encourages investors to consider the ethical, social, and environmental goals and impacts of companies and industries. As a result, it advocates for publicly traded companies to act responsibly and consciously in terms of their practices, products, and overall impact. Essentially, companies that follow ESG guidelines are choosing to prioritize having a positive effect on the world alongside their profit.  

Investments You Can Feel Good About

Investing in ESG stocks can help you feel good about where you put your money. There will inevitably be more ESG opportunities as the world becomes more sustainability-minded. If improving labor practices, reducing carbon emissions, advocating for human rights, and making positive change are important to you, sustainable investing may be something you want to investigate. A financial advisor can help you work through how to incorporate a diverse array of smart and sustainable investments into your portfolio.

Potential Challenges  

There are some concerns that sustainable investing may cost you more in the short term. This is in part because you are choosing to only invest in a select number of companies and industries. This, in turn, makes your pool of available investment opportunities much smaller. Additionally, more research is required for newer “green” companies that don’t have as extensive of a track record as more traditional companies and industries. It can also be difficult to compare data across ESG companies. Some investors may view ESG guidelines as having too much of an impact on a company’s bottom line, particularly if integrating more sustainable solutions in the short term leads to increased costs and lower profits.

Growth Over Time

Whether sustainable investing actually costs more depends on your personal values and financial goals. It also depends on your tolerance for risk. After all, any investment comes with some level of risk. With increased innovation, these companies will hopefully find new ways to grow their profits while remaining socially and environmentally conscious over the long term.  

Being a responsible investor may mean weighing your personal financial goals against your social and environmental goals for the world at large. However you decide to diversify your portfolio, make sure you do your research, ask important questions, and align your choices with your values.

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