The Effects of Investing in Sustainable Development

Investing in sustainable development can provide a sense of satisfaction if you know your money is investing in an industry that could potentially power our world, feed populations or help nurture and protect our environment.

Sustainable development investments could contribute to efficient, effective, consistent strategies for the future of the world. Typically, people and institutions only want to invest in a product if it generates strong and stable returns, not the effect it may have on the environment.

Last year, 193 nations adopted the United Nations Global Goals for Sustainable Development (SDGs), designed to protect natural resources, end extreme poverty and foster prosperity for all. These goals require an investment of approximately $4.5 trillion per year in developing countries until 2030, of which there is currently a gap of more than $3 trillion. Analysts project that if global investors allocated 1 percent of capital stock to sustainable development each year, these goals could be met, sparing millions of people from preventable diseases and providing education and economic opportunity.1

However, investing in sustainable development may come with its own risks, including natural disasters, political, economic, market and cultural instability in global markets. While these risks may increase exponentially with the amount of investment, individuals can help manage their personal risk by discussing these opportunities with a financial advisor who is qualified to offer these types of investments and determine whether they are appropriate for their financial situation.

For many investors, the transition to this type of investment has developed over time as a natural progression from philanthropy to values-based socially responsible investing (such as avoiding tobacco or arms companies) to today’s trend toward values-driven sustainable investing. Investments in sustainable development generally include social, economic or environmental causes in which risks may be managed and rewards are greater than just a possible monetary return on investment. For example:

  • Renewable energy sources
  • Alternative transportation
  • Clean water
  • Non-hazardous materials
  • Urbanization
  • Ethical consumerism
  • Green construction
  • Recycling industry
  • Organic foods

Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

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1 Scott Minerd. Guggenheim Partners. May 20, 2016. "Sustainable Development: The Future of Investing” Accessed June 20, 2016.

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