This year’s Earth Day focuses on combatting the existential threat of climate change in a tangible way: by shifting away from a fossil fuel economy and toward a green, carbon-neutral one. EarthDay.org, the global organizer of Earth Day, calls for individuals, governments, businesses and institutions to “recognize our collective responsibility and to help accelerate the transition to an equitable, prosperous green economy for all.” So, how does that translate to your investments? Let’s break it down.
What is sustainable investing?
Sustainable investing takes into consideration a company’s practices for environmental, social and corporate governance (ESG) and how they could affect long-term performance and investment returns.
Many Canadian investors are including ESG issues in their investment analysis and decision-making. Responding to an Ipsos poll conducted for SunLife Financial in August 2021, two-thirds of Canadians said that ESG factors play a “somewhat important” or “very important” role in deciding which investments they’ll buy. A survey conducted by the Responsible Investment Association in September 2021 found that 73% of Canadian investors were interested in responsible investing, and 77% said they wanted their financial services provider to inform them about responsible investments that are aligned with their values.
In addition to sustainable investing, investors also use these terms: responsible investing (RI), socially responsible investing (SRI), ethical investing, green investing and impact investing.
What ESG factors do investors consider?
Below are many of the non-financial issues that investors and other company stakeholders look at to assess ESG performance:
- Environmental: Carbon emissions, air and water pollution, energy efficiency, water usage, waste management, deforestation, commitment to biodiversity, sustainability of supply chains
- Social: Gender and diversity, labour standards, human rights, customer service, community…
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