An Introduction to Sustainable Investment

What is sustainable investing? Who uses is? Why is interest in it on the rise? What impact does a sustainability focus have on performance? How can investors implement a sustainable investment portfolio?

Introduction

Around the world, interest in sustainable investment is increasing rapidly. The assets under management of investment institutions that are members of the United Nations’ Principles for Responsible Investment (UN PRI) have risen to over $100 trillion as membership has swelled internationally from around 700 signatories a decade ago to now over 3,000.

But what does sustainable investment mean? In the simplest terms, it means incorporating environmental, social and governance (ESG) considerations into the investment process. The motivations may simply be to generate the best long-term returns based on the view that ESG insights can have a material impact on investment returns. For other investors there may also be a “traditional” motivation to appeal to beneficiaries, or to achieve “societal good.”

In this paper, we provide a broad overview of sustainable investing: what it is, who uses it, why interest in this approach is on the rise and how investors can implement a portfolio with a sustainability focus.