Green is the New Black: The Rise of Sustainable Investing
At its core, sustainable investing represents a departure from the traditional profit-at-all-costs mentality that has long dominated Wall Street. Instead of solely focusing on financial returns, sustainable investors consider all factors, including environmental, social, and governance (ESG) criteria, in their investment decisions. This genuine approach shows a growing awareness of the mutuality between financial performance and eclectic societal and environmental impacts.
Just by examining the numbers, it becomes clear how significant this shift is. According to an analysis by Morningstar, in 2020, sustainable open-end and exchange-traded funds available to U.S. investors saw a significant increase in flows, reaching a total of $51.1 billion. There was a substantial increase compared to 2019, where flows totaled $21.4 billion, and an almost tenfold increase compared to 2018, where flows were $5.4 billion. This rise in interest is a reflection of putting your money where your values are.
A number of factors are coming together to make sustainable investment very important in the financial world today. One important factor is that, due to science and general knowledge, more people are becoming mindful of how severely we're damaging the environment and how unjust socioeconomic conditions are. The urgency of climate change is forcing investors to reconsider investing in environmentally harmful businesses, such as those that rely on fossil fuels.
Concurrently, the demographics of consumers and investors are evolving. Gen Z and Millennials have a strong interest in sustainability, and they choose goods and services in line with their moral principles. This means that companies must take environmental sustainability seriously or risk losing customers and falling behind in the marketplace.
So, next time you're thinking about investing, why not go green? After all, green is the new black. And when it comes to making a difference in the world, that's a trend we can all get behind.
Bibliography
Hale, Jon. “A Broken Record: Flows for U.S. Sustainable Funds Again Reach New Heights.” Morningstar, Inc., January 28, 2021. https://www.morningstar.com/sustainable-investing/broken-record-flows-us-sustainable-funds-again-reach-new-heights.
Versace, Chris. “How Millennials and Gen Z Are Driving Growth behind ESG.” Nasdaq. Accessed April 15, 2024. https://www.nasdaq.com/articles/how-millennials-and-gen-z-are-driving-growth-behind-esg.