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What Is Sustainable Investing?

The Private Client Group
Wealth Management
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Sustainable Investing Defined

Sustainable investing is a way to leverage your investments to benefit society and the environment while potentially maximizing your returns at the same time. However, there is also always the potential for loss. 

Socially responsible investors encourage companies to help protect and improve important aspects of modern life, such as the environment, diversity, working conditions, and consumer protection. The primary objective is to avoid contributing to the harm that can result from negligent or aggressive industrial practices, whether on humans or the environment. 

With more options than ever before, you have the opportunity to diversify sustainability based on your risk tolerance.

Types of Sustainable Investments 

There are hundreds of environmental, social and governance (ESG) mutual funds and exchange-traded funds (ETFs) available today. These mutual funds, index funds, and ETFs provide access to multiple companies that fit the sustainable investing model by committing to socially conscious business practices. Some other investment vehicles, such as hedge funds, stocks, and even venture capital, are also becoming increasingly involved with sustainable investing.

As another example, community investments can help provide funding to companies that help local communities, without those companies having to go to a bank. In turn, this funding can help provide affordable housing and loans with the intent of reducing government assistance. Community investing focuses on disadvantaged communities and offers financial services to underserved communities. 

While most other investment types focus exclusively on financial return, sustainable investing focuses on additional goals, including health, peace, justice, morality, and a cleaner environment.

Considering Sustainable Investing

It's important to note that sustainable investing does not need to be a substitute for solid investment performance. Before investing, you should research and understand how it works. Also, understanding your risk tolerance — how much risk of financial loss you're willing to accept — is key, as there are many choices available with differing levels of risk. (As always, however, no investment type is guaranteed to accrue value, and any investment can lose value over time.)

Keep in mind individuals aren't the only investors, as religious organizations, foundations, credit unions, hospitals, and medical schools may also want to influence how companies are investing, with the aim of impacting the political and social climate.

Sustainable investing allows you to invest in companies whose values are aligned with your beliefs. Social awareness has increased throughout the last few years, and sustainable investing has a unique potential to contribute to a better world while potentially providing a healthy return  — and keeping you moving toward your long-term financial goals.

Our Responsible Investing Process

Fort Washington has a robust due diligence process, allowing our team to construct comprehensive portfolios utilizing ESG managers ranked highly by Morningstar and other third party data providers. Based on desired asset allocation, each asset class is screened to seek best-in-class external strategies that adhere to an ESG mandate. The selection process is both quantitative and qualitative and concludes with Fort Washington’s Due Diligence Committee — comprised of senior leadership and asset class specialists—interviewing managers of the fund. These interviews include wide ranging discussions on how the strategy measures and incorporates responsible investing into their investment approach.

Interested in sustainable investments for your portfolio? Contact us.

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