Sustainable Stories: Beyond Avoiding ‘Dirty Money’ to Making Good Money

An investment manager and I set aside time for a quick chat about investing and sustainability but chatted at length instead. The short version is that I was looking for her take on the ‘trend’ of sustainable investing—and what the term has come to mean for her work in advising clients on where to direct their investment dollars.

Sustainable investing seems to be more and more on trend; we discussed her take on how it has developed. Ten years ago, there was little chatter in the investment world on what investments might be considered sustainable ones. Profits, investment horizons, purpose, etc… were the topics clients wanted to talk about; and while they still do, there is a lot more interest in what their investment capital will do.

In the past, ‘ethical’ investing was the term used by those who were more mindful of not investing in unethical practices, rather than diving too deeply into what the investments were doing. There was an avoidance, (or aversion), to benefitting from investment in companies with sweatshops, doing environmental damage, using child labour, or any harmful business practice being carried out at home, or in other countries. If people would not engage in these practices themselves, they certainly did not want their money to support them, or to profit from such practices.

With increased understanding of globalization in business, it seems simple to just avoid these types of investments; sustainable investing though, is now a different proposition. Beyond a ‘no harm’ philosophy, investors are much more interested in seeing their money contribute to sustainable practices and ‘good’ business. She finds clients very ready to invest in funds and companies with solid environmental, social, and governance—and notes demographic differences. Her younger clients are the most enthusiastic, though she sees a much greater interest in every demographic than even just three years ago.

Based on the obvious goal of investing to grow one’s money, I was curious about the returns. My take on sustainable business is that it’s business, and therefore, it should be making money. We then had a fun side-discussion on the topic of making money, how easily money can be considered ‘dirty’, where that came from, and how sustainability might help clean up ‘money’s image…Unsurprisingly, her sustainable investments outperformed the benchmarks—significantly. Sustainable funds have been outperforming benchmarks over a 10-year time frame, and picking up speed in the more recent years means something (or many things) in those investments is going well. I started this piece promising a short version, so here it is: companies made money, had good environmental practice, good governance, and good management, and the investment checks on those companies were verifying it all. It’s quite literally — all good.

So how can companies be that kind of good? What do fund managers look for? On what are decisions based? Internationally, there is good guidance found in the United Nations’ Sustainable Development Goals, the SDGs, which are at the heart of sustainability practices around the world. To wrap up here, sustainability goes beyond ‘do no harm’, into practice that allows business to continue doing better.

The next sustainability story: what roles do diversity and inclusion play in sustainable operations? (And no, it’s nothing about ‘women bringing soft skills’…)