Learning to manage your money wisely isn’t always easy, but it ultimately pays dividends when it comes to your future (no pun intended). And if you have the extra cash, a good investment strategy is an important component of a smart personal finance plan. As corporations and individuals progress towards being more socially responsible, conscious and ethical in their approach, sustainable investing is becoming a crucial element of an effective investment strategy. The practice of sustainable investing refers to investments that take environmental, social and corporate governance (ESG) factors into account, rather than only financial considerations.
Ultimately, these factors begin to overlap because the companies that prioritize ESG will likely see greater success and financial gain in the long run. This is what sustainable investing is all about: placing stock into the companies that truly care about the impact they have on the earth and its inhabitants.
Expert Tips on Getting Started With Sustainable Investing
So, how can you learn to invest sustainably and ensure your money is going towards the companies and causes you believe in? Elke Rubach, president of Rubach Wealth: Holistic Family Advisors shares her top tips:
1. Take Stock of Your Finances
Before launching into any investment strategy, you’ll want to take an honest look at your current financial situation to determine the best plan for you.
“Figure out your situation first, then figure out how much you can invest, if anything,” Rubach recommends. “Don’t complicate things. It’s very simple: figure out how much money you make, figure out how much you spend, and how you’re spending it. It doesn’t matter if you make $6 million a week, if you’re spending $7 million, we have a problem.”
Although looking at your finances can be stressful, awareness is an important piece of the puzzle, especially if you hope to start investing for a brighter future.
“A lot of people get nervous when they have to tell us how much they make, but for people who make $100,000 or $1 million, the question is the same. If you’re spending more money than you make, then you’re not saving or growing, and maybe that’s what you want but at least you have an awareness of it.”
2. Do Your Research
According to Rubach, responsible and sustainable investing mainly comes down to knowledge, self-education and research.
“It’s risky and the need for common sense and financial literacy kicks in stronger than ever,” she says. “I think it comes down to a need for better disclosure on funds and education for investors.”
In other words, sustainable investing will require you to do some research on the best options for you, and potentially do a deep dive into the specific practices that companies are engaging in. Check out impact reports, case studies and online articles from trusted sources (Rubach recommends Advisor’s Edge).
3. Reflect on Your Values
Rubach also recommends reflecting on your own personal values and priorities so you can make decisions from a more informed, aligned place.
For example, you may feel a personal connection to environmental conservation efforts, while others may feel more drawn to supporting diversity and inclusion initiatives.
“What is it that you, as an investor, are looking for? How deep are you going to do your research? Is ESG the company’s primary driver?” She says.” Sit down and think about the causes you want to support.”
4. Start Small With Sustainable Investing
If you’re just starting out as an investor, Rubach recommends starting off small. There’s no need to reinvent the wheel or become the next Warren Buffet overnight (wouldn’t that be nice, though?).
“For younger people who are just starting out, let’s start local, start little,” she says. “Keep it simple and ask around or get involved with a local community foundation. Whether you’re investing in for-profit companies or not-for-profit, both are investments.”
5. Reach Out to an Advisor
And finally, working with a financial advisor can help you navigate your sustainable investing journey. Rubach says a personal finance advisor can answer any questions you may have along the way and caution you against making any ultra-risky moves.
Lead image by VectorMine/Adobe Stock.