On the surface, “how can I invest sustainably?” can sound like a daunting question. After all, when you invest with ESG (that is, environmental, social, and governance factors) in mind, it sure sounds like you’ve got to learn about dozens of unfamiliar investment strategies from companies you may not have heard of, and completely change your entire portfolio. Right?
That’s the fear anyway. But we’re here to tell you that fear is misplaced. For most people, sustainable investing 101 amounts to making, or shifting, one investment in your retirement plan or personal investments. Here are our top 3 sustainable investing tips to get started.
Step 1—What money?
Your first step is to identify where the money to invest sustainably is coming from. You can always pull money from your savings accounts to make a new investment. But you can also redirect money that currently rests in your existing ones, such as your retirement accounts, college savings, or personal accounts.
At a certain point of your life, you’re likely to have money stashed in a lot of different places. For example, your portfolio may look something like this:
Each one of those slices of the pie could be an opportunity to invest in sustainability. But you don’t have to reinvest every part of the pie to become a sustainable investor. To make your first investment, try focusing on just one slice.
You’re likely to find that some slices are easier to change than others. For example, if you’re in a 401k through your job, you may only have access to a limited menu of offerings, which don’t include sustainable options. But if you have an IRA of any kind, you should be able to change to a sustainable fund rather easily.
Step 2—Does your current fund company offer ESG funds?
The vast majority of people invest with the big names of the investment industry—Fidelity, Vanguard, BlackRock, and so on. Most (but not all!) of these well-known companies offer a number of ESG options.
In many cases, the easiest way to become a sustainable investor is to look at your current provider’s ESG offerings.
- The big companies typically offer their own ESG funds
- If you have a brokerage account, you may be able to access an entire menu of ESG funds from numerous providers
Transferring an existing account from a traditional fund to an ESG fund from the same provider (or through your brokerage account) can usually be done with a few clicks. Your menu might be limited, but for most investors the switch is an accessible option.
Step 3—Who Are the Sustainable Specialists?
If you’re not comfortable with what the big players offer, or you want to look at a wider range of choices, your third step is to find out which fund companies specialize in sustainability and what kinds of funds they offer.
Till Investors’ fund profiles (link to web location) are a great way to make quick work of this step. Different companies may have different priorities or strategies. The profiles identify the largest and best-known sustainable specialists and summarize their specific strengths.
There are other resources out there, such as the USSIF’s free Sustainable Investment Mutual Funds and ETFs Chart, or the Fossil Free Funds site from As You Sow.
It’s possible to swap many investments that you own into a fund from one of the specialists; sometimes, the specialists’ funds are available through brokerage accounts from the big players. From a practical standpoint though, many of these firms are far smaller and don’t have the same degree of technology to make the transition simple. In our experience, the easiest way to take advantage of these firms’ expertise is to initiate a new investment directly with them, using cash from your savings.
A Good Start!
Your first sustainable investment is like your first house—it’s not where you’re going to live forever. Make a solid choice that meets your needs now. As you evolve and expand your financial resources, you’ll gain a better sense of what matters to you, and if a change is warranted, you can make it. But as with a first house, it’s far better to pull the trigger today than to wait for the perfect one to come along.
Once you make that first sustainable investment, you’ll be sending a signal—that you believe your values matter, and that you expect to see your values reflected in what you choose to do with your money. Fund companies will notice. It’s just a start, but it will feel purposeful and powerful.
Tell Us Your Story
Once you’ve made your first investment, come dish with us. We want to know what your options were, what obstacles you ran across, what you invested in, and how it felt. Share on social media (listed below) or via email and we will feature it in an upcoming newsletter and on our website.
All submissions will be entered in a drawing to receive a free copy of our forthcoming book, Sustainable Investing: An “ESG” Starter Kit for Everyday Investors. We can’t wait to hear from you!