Sustainable Investing

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What is sustainable investing?

Colleen Silver, Senior Investment Solutions Specialist, Sustainable/ESG Investing)

Colleen: Sustainable investing refers to the collection of investment techniques that can help investors align their money with their values. While there are many different types of sustainable investments, what makes them alike is their consideration of environmental or social themes as a significant component of their investment philosophy and process.

Environmental themes generally refer to the conservation of the natural world and include a number of issues such as climate change and carbon emissions, biodiversity, and waste management.

(Visual Description: Environmental: Conservation of the natural world

Climate change and carbon emissions

Biodiversity

Waste management

Air and water pollution

Sustainable forestry

Regenerative agriculture

Resource efficiency

Clean oceans)

Social themes generally refer to the consideration of humans and can include issues relating to affordable housing, labor standards, human rights, and more.

(Visual Description: Social: Consideration of humans

Affordable housing

Fair labor standards

Human rights

Diversity

Economic development

Education

Health

Social and economic mobility

How is sustainable investing evolving)

Sustainable investing initially gained popularity decades ago, and the main strategy at that time was to avoid certain companies in order to match investors’ values.

When you eliminate certain investments, you run the risk of missing return opportunities across different market cycles. This is one reason sustainable investing became associated with sacrificing investment returns. But the evolution of sustainable investing means that this and other commonly held conceptions about it may no longer be true.

Shifts in global policy and societal behaviors are driving innovation and catalyzing the economic impact of environmental and social factors. Investors today have more transparency into the business operations and sustainable data of the companies in which they invest.

This data, plus innovation in the investment industry, means investors are able to express their values in ways beyond simply “avoiding investments.” At Truist, we believe this new paradigm of sustainable investing represents an expansion of traditional investing, and it should not require conceding returns.

(Visual Description: How does sustainable investing appear in portfolios?)

Investors have different motivations for pursuing sustainable investing—and they can all be valid—reflecting the unique perspectives and circumstances of each investor.

Three common motivations are:

1.       Improve investment outcomes – either by reducing investment risk or identifying investment opportunities

2.       Do no harm – by withholding investment in and support for certain business activities

3.       Make a positive impact – by aiding solutions to environmental and social issues

Different types of sustainable investing techniques are better suited to accomplish each of these objectives.

For example, those seeking to improve investment outcomes may choose a strategy that uses ESG integration, or the integration of environmental, social, and governance data, in its investment selection.

These investors may believe that businesses who are not thoughtfully addressing sustainability considerations could face increased operational costs, higher litigation risk, or talent drain.

ESG integration is a technique that can be used to help identify and mitigate these types of risks.

Alternatively, those same investors may choose a thematic sustainable investment. These aim to capitalize on companies driving and benefitting from the evolution of a variety of sustainable themes, from the energy transition to natural resource preservation, and others.

Investors who want to make a positive impact may use directed impact to invest in new solutions to social and environmental issues.

An investor’s financial and sustainable investing objectives—as well as the nature of their investment portfolio—will shape which types of sustainable investments to pursue.

(Visual Description Is sustainable investing right for you?)

Sustainable investing can look different to each investor. It’s a broad and ever-changing field that can be hard to navigate. Your unique investment and sustainable goals and circumstances should be a primary driver in determining which sustainable investments are right for you.

We invite you to explore with your Truist advisor how you can accomplish these goals within your portfolio.

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Disclosure:

Truist Bank. Member FDIC©2024 Truist Bank Corporation. Truist, the Truist logo and Truist Purple are service marks of the Truist Financial Corporation.