What is sustainable investing?

Sustainable investing prioritises funding companies that consider their long-term impact on people and the environment. These companies might operate within the clean energy or social sectors, for example, and make decisions that prioritise future gains over short-term profits.

Not to be confused with socially responsible investing (SRI) or environmental, social & governance investing (ESG), sustainable investing typically focuses on creating positive long-term social and environmental outcomes.

A growing number of investment funds offer sustainable investment options. And PensionBee offers two sustainable pension options: the Future World Plan and the Fossil Fuel Free Plan.

The three approaches to sustainable investing all aim to make positive investor returns while benefiting people and the planet, but they each have a slightly different focus:

Socially responsible investing (SRI)

  • Social outcomes

Sustainable investing

  • Social outcomes
  • Environmental outcomes

Environmental, social & governance investing (ESG)

  • Social outcomes
  • Environmental outcomes
  • Governance principles

Examples of sustainable investing

Companies can positively impact society and the environment in two key ways; the way they conduct their existing business, and the product or service they provide. Investors may choose to put money into companies that meet one or both of these requirements.

The way companies conduct their business

Companies of all sectors may choose to run their business in the following ways, for example:

Social practices

  • Providing high employee welfare standards
  • Providing high consumer protection standards
  • Having adequate board/senior-executive race and gender diversity
  • Working with ethical supply chain partners (eg. factories that provide fair working conditions)

Environmental practices

  • Reducing or eliminating greenhouse gas emissions
  • Disposing of waste in non-environmentally damaging ways
  • Producing recyclable products
  • Incorporating circular water systems in production processes
  • Replacing petrol/diesel vehicle fleets with electric ones

The product or service they provide

Some companies may be considered sustainable investments due to the nature of the service or product they provide, for example:

Social sectors

  • Low-cost computer suppliers to developing countries
  • Educational institutions
  • Accessible finance providers
  • Healthcare services

Environmental sectors

  • Wind and solar farm developers
  • Sustainable packaging manufacturers
  • Organic food producers

Types of sustainable investment funds

There are a growing number of sustainable investment funds and pensions to choose from. And each differ in their investment selection criteria and performance ambitions.

Some, like the PensionBee Fossil Fuel Free Plan, exclude the fossil fuel and tobacco sectors, while only investing your money in companies aligned with the Paris Agreement goals.

Others, like the PensionBee Future World Plan, invest your money into companies that pledge to move to an environmentally-friendly economy.

Sustainable investment pensions

As social and environmental causes have become a growing concern for people across the world in recent years, pension providers have started to offer plans that cater for their needs. So it’s now possible to save for your retirement while contributing towards positive social and environmental change.

PensionBee offers two pension plans that fit this requirement, including:

  • Fossil Fuel Free Plan: Excludes the fossil fuel and tobacco sectors while only investing your money in companies aligned with the Paris Agreement goals.
  • Future World Plan: Invests your money into companies that pledge to move to an environmentally-friendly economy.

For more information, read: Ethical and ESG investing and its impact on pensions.

Risk warning

As always with investments, with a pension your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.

Last edited: 11-03-2021

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