Here are 5 ways investing sustainably is better than traditional investing

If you want to grow your nest egg, it doesn’t mean you have to compromise your values. There are plenty of investments you can make that are more conscious of environmental and social issues while still focusing on growing your money.

While the term “sustainable investing” is often used as a catch-all for these types of investments, there are a few key types that you should be aware of —the most popular two being ESG investing and SRI investing.

While ESG investments are evaluated through a broader range of environmental, social, and governance (ESG) factors, socially responsible investing (SRI) helps you weed out industries you don’t want in your portfolio like fossil fuels and tobacco.

Regardless of how sustainable you want to make your portfolio, Coast Capital offers a wide range of different sustainable investing portfolios — from low-risk 100% income-producing securities to medium-risk, high equity portfolios for long-term capital growth potential.

Whether you’re looking to jump into the world of investing with sustainable choices or simply wish to diversify your portfolio with solid investments, here are five reasons you should consider investing sustainably.

Sustainable investments perform better

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Having sustainable investments isn’t only morally good, but good for your returns as well. A recent study showed that responsible investment funds outperformed traditional Canadian equity, US equity, and global equity funds over three-, five-, and 10-year periods. Another study at Carlton University shows that SRI equity mutual funds in Canada outperformed their respective benchmarks 63% of the time.

Even the S&P 500 offers an ESG Index, which has outperformed the traditional S&P 500 at times, since its launch until the end of 2022. So, even if you’re not particularly concerned with sustainability when it comes to your investments, you don’t have to sacrifice performance by investing in ESG.

Reduce your investment risk

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While investing sustainably isn’t going to give you massive short-term returns, it may help you keep your portfolio growing consistently over a long period of time, despite anticipated dips in performance when the markets take a step back.

Because ESG factors reduce the exposure to factors you wouldn’t find on corporate financial statements, portfolios with overall high ESG scores are shown to have lower volatility. 

Yes, there’s a thrill of seeing high short-term gains, but investing sustainably will help you meet your long-term investment goals in more of a measured way.

Investments that will last

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Let’s face it, having sustainable investments that contribute to a global good helps increase their longevity.

While it might be tempting to put your money into the latest stocks that have all the buzz of being sound but aren’t contributing to social or environmental good, they might not give you the kind of long-term returns you’d hope for. Chasing the next Gamestop or flashiest crypto often leads you down an expensive path.

Also, not all press is good press, as negative headlines in the news can often lead to investments suffering a loss of value or divestment. 

Diversifying your portfolio

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Even if you’re not going to sink all your money into sustainable investing, hedging your bets and making sure you’re not missing out on earnings is just a smart move in general.

Spreading your money out to various investments helps you get the largest returns because it means they don’t come at the whims of one sector — that’s basic investing advice.

Diversifying your portfolio with sustainable investments could better the health of your overall returns in the long run. If you’re only putting your money in high-risk, flavour-of-the-month investments, please consult a doctor about your blood pressure.

Investments that match your values

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When it comes down to it, investing in companies that align with your values helps contribute to a better future.

If you care about how companies can be more environmentally conscious, how they maintain equity in terms of gender, inclusion and diversity, how they treat their staff and go on to contribute to social justice or human rights issues, the best way to do that is to literally put your money where your mouth is.

Because Coast Capital is a member-owned credit union, investing with them means getting advice that’s always in your best interest based on your specific needs, goals, and financial situation. To learn more about your options when it comes to sustainable investing, or to meet with an advisor for a one-on-one consultation, visit Coast Capital’s website.