A sustainable portfolio is much more than just an ethical investment strategy. It’s a way of looking at the world that extends beyond your financial statements, analyzing risk factors, and viewing your investments as a personal statement about who you are as a person.
A sustainable portfolio is one that seeks to produce positive environmental and social impacts as well as financial returns. It’s not enough to simply avoid investing in companies that make alcohol, guns, or other controversial products; a truly sustainable portfolio must actively seek out green and ethical investments with the potential for strong financial returns.
This guide will walk you through all the steps involved in creating a sustainable portfolio, from understanding your own values to choosing the right mix of investments.
Step 1: Decide on Your Values
The first step of building a sustainable portfolio is to decide what you value. These values can be anything – your political beliefs, religious beliefs, social views, or personal ethics. Whatever they are, you’ll want to make sure they’re reflected in the companies you choose to invest in.
For example, if you believe in gender equality you might want to avoid an investment in a company that pays men more than women for the same work.
Step 2: Research Reliable Information
The next step is to learn about the industries you’re interested in investing in.
Make sure you’re getting your information from reliable sources so you can trust that it’s accurate. This will help you avoid investing in things you don’t actually care about.
Some of the best resources for finding information about industries include government statistics, non-profit organizations (like Greenpeace or the WWF), industry trade associations, and online forums where people discuss their experiences working in the industry.
The key here is to do your research. You don’t need a comprehensive understanding of every single business in the world; you just need to know enough to make a sound investment decision.
Step 3: Pick Your Investments
Now that you know everything you need to know about industries and companies, it’s time to pick your investments.
This will depend greatly on a variety of factors such as the company’s values, its products or services, its target market, the company’s sustainable practices or commitment to sustainability, and naturally, the amount of risk you’re willing to take. You are in business after all, and any positive financial returns will be a welcome side effect if you invest only in companies that produce things you care about.
Step 4: Diversify Your Portfolio
One of the most important parts of building a sustainable portfolio is diversifying your investments. If you put all of your eggs in one basket, you run the risk of losing everything if that investment tanks.
Try and create a mix of different types of investments to maintain a ‘balanced diet’. This way, if one investment fails, the rest of the portfolio can carry the weight.
Step 5: Monitor and Maintain Your Portfolio
Once you’ve built your portfolio, you need to monitor and maintain it. This means checking in on your investments regularly and making sure they’re meeting your expectations.
If your investments aren’t living up to your values, you have a few options. First, you can try to talk to the company and encourage them to take steps to make their business more sustainable. Second, you can switch your investment to something more suitable.
The Bottom Line
A sustainable portfolio is the best way to create positive social and environmental change while making some money out of it.
Most importantly, a sustainable portfolio is one that you build yourself. It’s your investment philosophy that reflects your values and reflects the kind of person you want to be.
It’s not enough to simply avoid investing in harmful industries; your investments need to actively produce positive change.