What is sustainable investing?

Broadly speaking, sustainable investing is a style of investing that prioritises choosing funds and companies that protect the environment and its resources.  However, different terms may mean slightly different things to different providers, so it’s always important to do your own research and understand what these mean. 

 Why is sustainable investing important?  

You might have heard that the wealthiest 1% of people (that’s approximately 77 million people) are responsible for the same number of emissions as 66% of the poorest (around five billion people). But did you also know that the bulk of those emissions doesn’t come directly from their personal consumption or actions, but from their investments? To put it simply, the wealthiest 1% of people are choosing to invest huge sums of money in highly polluting companies.  

But it doesn't have to be this way. We can choose to make our money socially and environmentally useful by investing in companies and innovations that have a positive impact on the world we live in.  

What makes something a sustainable investment?

Nowadays, there is a lot of information out there about what a sustainable investment or company looks like. The FCA has introduced labels that recognise investment funds with different sustainability goals. These sustainability labels are “focus”, “improvers”, “impact”, and “mixed goals”. These labels all give you information about the goals of the fund, and the approach to achieving them. You can read more about the individual labels here. 

However, not all providers use these labels, and not all can. For example, because the funds we offer are offshore funds (domiciled in Luxembourg), we can’t apply to use these labels. Of course, this doesn’t mean that we have lower standards - far from it!  

As an impact investing frontrunner, Triodos Impact Funds go beyond ESG (environmental, social and governance standards to measure impact). ​​​We do this by focusing on companies that develop solutions to the world's most critical sustainability challenges. 

We have our own rationale and minimum standards. All investments made by Triodos focus on at least one of five interlinked transitions: food, resource, energy, societal, and wellbeing. We actively monitor and track company activities, such as greenhouse gas emissions, recycled waste, and CEO to employee pay ratio. 

Through it’s stewardship policy, Triodos Investment Management actively engages with the companies the funds invest in, through one-on-one conversations to discuss ad-hoc sustainability topics - such as positive impact and alignment with our minimum standards - and following a formal engagement agenda. The four main topics for 2023-2025 were climate change, executive remuneration, plastics and packaging and family-friendly work policies. You can read more about our approach to impact investing here.

Avoiding greenwashing  

Even with guidelines, greenwashing is still possible. Greenwashing is when something is passed off as more sustainable than it is. And it’s also worth considering that your definition of sustainable might mean something different to someone else. For example, one person might want to invest in an organic dairy farm, whilst someone else might only be interested in vegan investment options. 

That’s why it’s always important to do your own research about what your money is funding, rather than relying too heavily on labels. At Triodos, we are radically transparent and are currently the only bank that publishes the details of every single investment we make, so you can always know exactly where your money is going.  

Why should I choose sustainable investments?  

If you want to use your money to make a positive impact – in service of people, nature, and the future we all share – then sustainable investing could be for you. However, there are many factors to consider, such as whether you can afford to potentially lose money, whether you have built enough accessible emergency savings, or if you can invest for the long-term. You should do your own research about whether investing is right for you, and seek the help of an independent financial adviser if you aren’t confident making decisions about your finances. 

Remember that your money has power. Every decision you make with your money is like a vote for the kind of world you want to live in, and your investment choices are particularly impactful. You can fund projects and companies that align with your values, and are working towards a better future for people and the planet.