What is sustainable investing?

Sustainable investing is an investing philosophy that considers a variety of environmental, social and governance factors to align your portfolio with your personal values — while also pursuing long-term financial performance.

It’s an approach that has become more prevalent in recent years as investors seek to use their investments to address societal issues that are important to them. However, because each investor has unique preferences, values and goals, one person’s sustainable investing strategy may look different from another’s.

If sustainable investing is a priority for you, an Ameriprise financial advisor can help you incorporate this approach into your portfolio in a way that reflects your personal values and beliefs.

What is sustainable investing?

Sustainable investing is a broad investment approach that goes by many names, including values-based investing; environmental, social and governance (ESG) investing; and impact investing, among others. At its core, this approach includes any method of investing that considers personal preferences and financial return.

Interest in sustainable investing has grown in recent years as investors have begun to demand more value from their investments. You may be motivated to pursue a sustainable investment strategy designed to enhance returns by mitigating risk that could affect your portfolio, such as negative publicity, adverse environmental outcomes and social issues. You may also be driven to use your personal capital to help promote positive corporate behavior, encourage environmental transformation and advance social responsibility.

Learn more: Aligning investments with your financial goals

What are different sustainable investing strategies?

There are a variety of different approaches to sustainable investing. Here are the most common:

• Values-based investing refers to aligning investments with non-financial aims like social or moral objectives, often using a screening approach that results in the intentional exclusion or inclusion of investments that the investor views as negative or positive. Negative screening involves excluding certain investments that conduct business in a sector the investor would like to avoid, such as tobacco. Conversely, positive screening identifies criteria the investor views as favorable and would like to make part of their portfolio, such as companies that prioritize environmentally conscious practices.
• Environmental, social and governance (ESG) involves considering environmental, social and governance factors in the process of evaluating and selecting investments. Some examples may include:
  • (E)nvironmental: Looks at climate policies, energy use, waste management and conservation.
  • (S)ocial: Looks at policies on discrimination, gender, diversity and inclusion, human rights, labor practices, ethics and corporate social engagement.
  • (G)overnance: Looks for diverse and independent board of directors and corporate transparency, among other policies.  
• Impact investing refers to investing with dual objectives of generating a return and driving an environmental or social agenda. Often this investment approach seeks to address a specific issue and outcome and places less emphasis on investment performance.

Is sustainable investing a priority for you?

An Ameriprise financial advisor can help you build a portfolio that is uniquely tailored to your values and goals, while also helping to ensure you’re diversified across different asset classes.