Investing sustainably allows you to align your investments with your values. But we’re interested in more than just feeling good about our investments. How can sustainable investing actually create change?
There are at least three mechanisms: financial incentives, shareholder voting, and media attention.
The first and maybe most obvious impact to companies is financial. Investing in companies has an impact on demand for their stocks and bonds, and therefore makes it easier for them to raise money to fund their growth. Conversely, divesting from other companies makes it harder and more expensive for them to raise money, hurting their growth prospects.
The second and lesser known source of impact from sustainable investing is shareholder voting. Casual investors are often unaware that a number of significant issues can be voted on or influenced by shareholders. Individual investors rarely have the capacity to sway voting on a particular issue, but funds, made up of many investors, often can. If more people invest in funds that have an environmental and/or social objective, this pooled voice can influence companies through their voting power and change companies’ policies from within!
The last and potentially most impactful agent of change from sustainable investing is media attention. Every article about the growth of sustainable investing, every video, and every tweet showing the rise of consumers demanding more from their investments permeates and influences companies’ decision-making. Knowing that investors are holding companies accountable for more than just shareholder returns has an impact. Companies also see an opportunity to have a positive mark on our society and gain positive publicity by making sustainable business choices.
The more accessible sustainable investing is and the more participants that are influencing companies, voting with their dollars and generating media momentum, the greater the positive impact we can have. Join the sustainable investing movement at Vestive.