3 Sustainable Funds To Buy For Purpose And Profit

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Rapid climate change, rise in global warming and the raging pandemic has forced investors to reassess the scope of physical risks that impact financial markets. In the past decade, effects of climate change have gradually permeated through daily lives and there is an urgent need to take steps toward conserving the environment. In short, it’s time to look toward a sustainable future.

While governments and businesses do their part in conserving nature and adopting sustainable practices, investors also need to show a sense of accountability. How? Investors should focus more on being responsible by putting their wealth into sustainable businesses. When we talk about responsible or sustainable investing, it is an umbrella that covers impact investing, socially-responsible investing, environmental, social and governance (ESG) integration, and climate investing.

Let’s talk about each of the above category in brief. Impact investing focuses on generating measurable social or/and environmental benefits. Next, we have socially-responsible investing that falls in line with investors’ ethical values and reduces the negative impact on environment and society. ESG integration considers ESG factors to enhance long-term returns and risk management. Lastly, climate investing, as the term suggests, focuses on ways to reduce climatic risk, looking for low-carbon investment with net-zero emission targets.

Sustainable funds have proven to be capable of surviving market gyrations, especially during lows and high volatility. According to a Morningstar report, U.S. sustainable funds witnessed $21.5 billion in net inflows in the first quarter of 2021, which is higher than the previous record and all-time high of $20.5 billion achieved in the fourth quarter of 2020. In fact, sustainable funds witnessed a net flow of $51 billion, which is more than double the total for 2019 ($21.4 billion) and a ten-fold growth from 2018’s $5.4 billion.

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