We are changing the world through sustainable investing. You may be asking yourself, “what is sustainable investing” and “why do I care?”
Women wield power with their investments in changing the world for the greater good of society.
First, let’s define what sustainable investing is and then address why women are key players and how we can change the world one investment at a time.
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Sustainable investing generates long-term competitive financial returns AND positive social impact. Win! Win! In other words, we can make money while making a positive impact on our world. You may also hear it referred to as impact investing, responsible investing, and values-based ESG investing.
ESG includes: Environmental factors like energy and water use, carbon emissions, recycling, and waste output, and the workplace environment. Social factors include how you treat your people, customers, suppliers, community, and all stakeholders. It includes pay and advancement equity, as well as gender, age, and ethnic diversity. Governance factors include leaders with integrity, competence, experience and honesty, and having a diverse board of directors. It also includes a commitment to transparency and being open to new and divergent ideas.
The focus of impact investing is to achieve positive change with a social, environmental, and/or diversity dimension. Putting our money to work through impact investing influences the behavior of the largest and most powerful multinational corporations in the world for the greater good of society.
Why are women key to driving impact investing? We have the money!
Women create, control and influence a huge amount of wealth. As a matter of fact, “women control 51% of the personal wealth in the U.S., an estimated $22 trillion worth.”
Given the size of women’s wealth, we are key players when it comes to investing. As investors, women’s proportion of private wealth is growing – “adding $5 trillion to the wealth pool globally every year and outpacing the growth of the wealth market overall.”
And women care about where their money is invested! Women are highly motivated to think about impact and non-financial returns in their investment and financial decisions.
According to research published by Moxie Future, women are leading the way when it comes to investing responsibly with almost two thirds of those surveyed expressing an interest in pursuing investments that have a beneficial impact on society.
“Our survey shows that female investors want more than just good financial returns,” says Moxie Future’s Founder Ms. Jessica Robinson. “In addition, increasing numbers of professional women want to make investment decisions that positively influence the world and are aligned with their values.” If you want to read more, checkout Jessica’s book “Financial Feminism, A Woman’s Guide to Investing for a Sustainable Future.”
Women are more focused on their financial future as a result of the pandemic. A study by Fidelity Investments shows 67% of women interviewed said they are more engaged in managing their money and have expanded their efforts to help shore up their finances. Yeah!
And “2020 marked a breakout year for ESG investment performance,“ Moody’s wrote on February 23, 2021 that, “Environmental, social and governance (ESG) themed investments have become one of the best performing investment categories in recent years, paving the way for continued growth of this strategy.”
A new US SIF: The Forum for Sustainable and Responsible Investment report found that $17.1 trillion were in responsibly invested assets in the U.S. at the start of 2020, up 42% from just two years prior.
“The winds of investing in the U.S. are starting to shift and women, it turns out, are a driving force behind the change.” MarketWatch reported recently.
Given the amount of wealth women now own, they have the potential to drive the investment industry. Female investors can invest their money in companies they want to succeed. As sustainable investors, we can assert our view on what the world should look like – cleaner, fairer, equitable, and sustainable.
A recent RBC Wealth Management study of their U.S.-based clients found that “female clients are almost twice as likely as their male counterparts to say it is important that the companies they invest in integrate ESG factors into their policies and decisions….[and are] more likely to prioritize ESG impact when considering what companies or funds to invest in, while male clients are much more likely to prioritize financial performance.”
You may now be asking, how do I go about investing sustainably? Jessie Robinson suggests, “One of the best ways to start your sustainable investing journey is by identifying your priorities – the issues you really care about. What sort of world do you want to live in? Where do you want to see change happen? In other words, what kind of issues are important to you?”
Once you understand your values, you can start researching your investments to see if they are in companies you want to be part of. Do these companies promote your values?
I was shocked to learn that clothing manufacturers are the #2 highest polluters of any industry, oil being #1.
It takes some time and effort to digest what companies you own in your portfolio, but it’s worth the effort. Most big businesses now outline what they are doing to meet their Corporate Social Responsibility goals in their annual reports and or on their website. Sometimes these are called Sustainability Reports. This is a good place to start looking into your companies.
Instead of investing in generic mutual funds, you may consider investing in ESG funds like Vanguard’s FTSE Social Index Fund (VFTAX) that specifically excludes stocks of certain companies in industries such as: adult entertainment, alcohol, tobacco, weapons, fossil fuels, gambling, and nuclear power. Another company which invests with purpose and focuses on impact investing is Nia Impact Capital.
You can also look for actively managed funds that target specific sustainable qualities like water, climate change, diversity or gender equality. For example, Fidelity has Fidelity® Women’s Leadership Fund (FWOMX) which invests in companies that prioritize and advance women’s leadership and development. They also offer Fidelity® Water Sustainability Fund (FLOWX) that invests in companies helping to deliver safe, reliable, and easily accessible water.
If you’d like to invest in ESG funds but don’t want to choose your investments yourself, there are robo-advisors that offer ESG portfolios. Consider Ellevest which was built by women for women investors.
Given our growing financial power, the values that women hold will shape how wealth is created, mobilized and passed down to the next generation. And increasingly, studies show that we value the principles behind impact investing.
The bottom line is women desire to make investing decisions that are not only financially sound but also make a measurable impact on society and the environment.
We vote with our dollars and our wealth is growing. So make sure you know what you are investing in and what companies you are supporting. We can have both financial returns and social impact.
If you’d like to further the conversation about impact investing and how you can participate, join my private Facebook Group, Women Talk Finances, where we discuss everything financial.