Gone are the days when people just invest in the company by looking at its profit margins, expansion projects, leadership team etc. Now investors believe in value investing. It’s important for them to know how the company is going to utilise the funds.
They are more interested in companies that are taking an interest in social and environmental causes. This has led to a rise in sustainable and socially responsible investing. Through this blog, we will try to get more information about this.
What is Sustainable Investing or Socially Responsible Investing?
Sustainable Investing or Socially Responsible Investing Is a type of investing approach under which
an investor considers how the company takes social responsibility. Here the investor invests with an objective of not just financial returns but also considering how this investment is going to bring change in the environment, ethics and social change.
Here the ESG factors are taken into consideration. ESG stands for environmental, social and
corporate governance. Investors assess the company on these ESG factors before investing.
Responsible investors have started giving importance to such nonfinancial parameters while investing. They see to it how organisations respond to matters like climate change, water management, pollution etc. before investing.
Benefits of Sustainable Investing and Socially Responsible Investing?
- Invest in Your Values
The main benefit of this type of investing is that you can consider your ethics and values while investing. You can invest in those companies that share the same value as yours and live a peaceful life.
- Stay Invested for Long Term
Here you are investing not just to earn profits. But you also look upon social responsibility matters taken care of by the company. You look to your investment as something that will create a better world. So, you are ready to stay invested for the long term.
- Better Returns
This type of investment uses traditional financial analysis to assess the probable returns. This will give you higher returns in the long run.
- Good Way to give back to the Society
ESG investing allows you to invest in creating a positive impact on society. It encourages social concerns like protecting employee welfare, fostering relationships between businesses and shareholders etc.
- You are Benefiting Ethical Companies
When you are into socially responsible investing, you are punishing the companies that are
working unethically. At the same time, you are also rewarding the companies that are working on ethics and social responsibilities. You are doing this by investing in these companies.
When Socially Responsible and Sustainable Investing Started in India?
The covid19 pandemic brought a change in the way investors started looking towards investing. They
started preferring those companies that are focused on social responsibility and sustainability in their business values. The AUM of ESG funds in India was noted ₹11956 crores1 as per AMFI as on 31st March 2022.
Various Types of Socially Responsible Investments
An investor can invest in socially responsible investments in the following ways: –
- Mutual Funds and ETFs
There are certain mutual fund schemes and ETFs that follow ESG criteria. An investor can look into this and invest as per their values and goals.
- Community Investments
Community investments are also a good way to socially responsible investments. You can invest your money in projects that are benefitting the communities.
- Microfinance
You can also be socially responsible by offering microloans to small companies. They are unable to get funding so easily.
Conclusion
Social and sustainable investing started long ago in the West but it gained momentum in India during the pandemic when markets were going down. People are now taking care to invest in those companies that care about social and environmental issues. This satisfies their soul and also makes them stay invested for the long term with earning better returns.
