Many people strive to improve the world in any way they can. But there’s no reason to sacrifice your wealth and security to do so.
Fortunately, one investing trend gives you that warm and fuzzy feeling that comes from doing good, while also benefiting your portfolio.
It’s called double bottom line investing, or “impact investing,” and it’s becoming a popular way to capitalize on businesses.
And there’s no better way to simultaneously boost your philanthropic spirit and portfolio than by investing in sustainable companies…
Sustainability used to be something businesses felt compelled to practice due to outside pressure from their stakeholders.
But more and more companies that have made sustainability a core element of their business strategies are finding that their efforts deliver significant value. Gains in the market can come in the form of reduced risk, lower costs, sustainability driven market opportunities, and top-line growth.
There are many intangible benefits, too, such as greater customer loyalty, higher brand value, as well as improved ability to recruit and retain top-notch employees.
Today, sustainability has been reclassified from a cost center to a profit center.
Investing in businesses that have established sustainability practices – such as environmental, social, and corporate governance (ESG) and environmental health and safety (EHS) – falls under the umbrella term of socially responsible investing (SRI).
And because SRI is now on the radar of institutional investors, corporations are taking heed. According to the Social Investment Research Analysts Network, about half of the U.S. companies in the S&P 100 Index now disclose information about ESG issues and practices.
Where to Start?
There are a myriad of public names making strides in sustainability.
Indeed, sustainable investing is becoming easier as the number of opportunities grows and more third-party facilitators are forming to manage sustainable portfolios.
These initiatives go well beyond the environment, too, and can focus on such issues as labor relations, healthcare, and education.
A few examples of big, sustainable investor-worthy companies include food giant ConAgra Foods Inc. (CAG) and The Coca-Cola Company (KO). ConAgra has agreed to eliminate suppliers engaged in deforestation for palm oil. And Coca-Cola has partnered with NRG eVgo (a subsidiary of NRG Energy) to assist with the goal of 1.5 million zero-emission vehicles on California’s roads by 2025.
Additionally, General Electric (GE), Kimberly-Clark Corp (KMB), Alcoa (AA), Dow Chemical Co. (DOW), and DuPont (DD) have begun to report on their sales of environmentally oriented products and services.
There are several other “good” companies out there, and several resources to help you find your SRI.
B Lab, for example, is a nonprofit that invented the benefit corporation (B Corp) label for companies that turn a profit while benefiting its workers, community, and the environment. Green Mountain Power, a Vermont-based energy company owned by Valener Inc. (VNRCF), is the first utility in the world to become a certified B Corp. Today, there are B Corps in about 37 countries.
Bloomberg’s ESG’s database and Bloomberg’s Sustainalytics’ proprietary indicators also provide investors with a macro-level assessment of how companies are managing their ESG capital.
And B Analytics is a rapidly expanding analytical tool, allowing investors to screen companies and funds for their sustainable practices in the United States, Europe, and beyond.
You can also research companies that are making a concerted effort on the sustainability front through the World Business Council for Sustainable Development and the Environmental Leader.
Now, if you prefer a third party to choose these companies for you, there are plenty to do so…
Leave It to the “Do Good” Experts
Funds such as Green Century Funds and indices like the iShares MSCI USA ESG Select (KLD) construct portfolios of companies proven to be sustainable.
And more recently, a few startup consultancies are working toward matching the investor with the appropriate sustainable investment based on the investor’s area of interest – such as water, human rights, or even plastics pollution. The latter will soon have its own investment fund, ThinkBeyondPlastic.
As always, you should keep in mind that neither bottom line investment is ever guaranteed.
The equity value of any of these stocks or fund holdings can fall, despite passing the sustainability test. And even though companies have sustainable mandates in place, they don’t always meet their goals.