Types of sustainable investing
More companies are moving towards sustainability, although each is transitioning at its own pace. Here are three types of sustainable business practises:
Transitioning - over the long-term towards sustainability. Developing plans to phase out fossil fuel usage, or introduce more renewable business practises.
Aligned - to sustainability commitments, like The Paris Agreement. Creating policies that support climate action and each year getting nearer to net zero.
Impact - made by only acting sustainably. Building a business model that isn’t dependent on damaging the environment to be profitable.
From increasing consumer interest in environmental issues there are more sustainable investment funds to choose from - including sustainably invested pensions.
Consumer demand led to PensionBee’s Climate Plan which invests in more than 800 publicly listed companies globally - all actively reducing their carbon emissions and leading the transition to a low-carbon economy.
Measuring sustainability
While the market for sustainable investment products has grown substantially, each can differ in their investment selection criteria and ambitions.
All sustainable investments aim to make positive investor returns while benefiting people and the planet. There are three approaches to measure this:
Socially responsible investing (SRI)
- Social outcomes
Sustainable investing
- Social outcomes; and
- environmental outcomes.
Environmental, social & governance investing (ESG)
- Social outcomes;
- environmental outcomes; and
- 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; and
- 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; and
- 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; and
- healthcare services.
Environmental sectors
- Wind and solar farm developers;
- sustainable packaging manufacturers; and
- organic food producers.
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.
At PensionBee we offer our customers the Climate Plan. The Climate Plan is designed to achieve net zero emissions by 2050 through an accelerated decarbonisation strategy. The plan’s objective is to align with the goals of the Paris Agreement to keep the rise in global surface temperature well below 2°C above pre-industrial levels. It does this by continually reducing the total intensity of the GreenHouse Gas (GHG) emissions produced by companies in the plan by at least 10% each year.
For more information, read: ESG investing and its impact on pensions.
Risk warning
As always with investments, 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: 05-12-2024
