Broaden Your Knowledge On Sustainable Investing With This 101 Guide

By Caitlin Booth

Sustainability—it’s no longer a mere buzzword, but something that is front of mind in so many aspects of life now. For us, sitting right next to it in the passenger seat is our money. With inflation being a total killjoy and the rising cost of living having us swapping delivery meals for home-cooked dinners, we’re in the market for some planet-friendly investing tips (as well as some cooking hacks) to help put the spare cash we do have to good use. 

If your sustainability and money worries have also collided, it's likely you're looking for a way to improve your financial situation with some sustainable investing, too. New to the investing game? Trading apps like moomoo can help you take charge of your money and where it’s being invested. The cherry on top is that new users who sign up before October 31 will receive a head start on their sustainable investing journey with $10 from moomoo for every $100 they deposit, up to $50*. 

Moomoo is powered by state-of-the-art artificial intelligence tools and has access to level-2 data on US stocks to lift the lid on the context behind buy and sell prices. If you’re asking yourself ‘what’s level 2 data?’, don’t worry, we did too. Basically, level 2 data offers a more in-depth look at the resting orders in the market and adds context to why buy and sell prices have gone up or down.  

If you’re keen to drill down a little further not only on how your potential investments might perform in the market but also how they might impact the environment and community around you, read on to get our 101 on sustainable investing. 

What Is Sustainable Investing?

Basically, it’s investing your money in places that are doing good things for people and the planet. According to Harvard Business School, sustainable investing refers to a range of practices ‘in which investors aim to achieve financial returns while promoting long-term environmental or social value.’ Intersecting traditional investment approaches with environmental, social and corporate governance (ESG) insights, sustainable investing encourages comprehensive analysis of outcomes and better investment decisions for future, real-world impacts. 

How Does It Work?

Much like choosing to ride your bike to work or changing who you bank with to reduce your impact on the environment, there are a couple of ways that big-scale sustainable investing can work. Firstly, there’s negative or exclusionary screening which excludes specific sectors, companies or practices from your portfolio so that your money isn’t going towards projects or resources that don’t align with your parameters for sustainable practice.  

There’s also positive, or ‘best-in-class’ screening which includes investments in sectors, companies and projects that perform exceptionally within the parameters of the ESG scope. This can include a company’s impact on:

  • Environment, such as water use, conservation, carbon production and transition to renewable energy.

  • Social and community causes, from big-scale human rights issues, diversity, and pay, to direct community impact and support. 

  • Governance, including goals for improvement of practices, quality of systems reviewing management and board and transparency of practices and anti-corruption frameworks. 

There are also subcategories of sustainable investing such as community investing which takes a hyper-local approach. Community investing aims to make a direct local impact by investing in initiatives that provide safe and affordable housing, job opportunities, education, healthcare, financial counselling, childcare, and other essential community services. 

If you’re a big wig with a heap of cash to splash around, you might want to use your coin for activist investing. Take Mike Cannon Brookes for example. Earlier this year the Atlassian co-founder bought an 11.28% share in one of Australia’s largest non-renewable energy providers, AGL. This investment, which we personally can only dream of being able to achieve any time soon, is a huge step forward in improving the timeline for transitioning away from coal-fired power generation in Australia. 

Does Going Green Leave Your Growth Looking A Little Lean?

If you’re keen to grow your coin but are concerned that choosing more sustainable options might see sluggish results, think again. A recent white paper by the Morgan Stanley Institute For Sustainable Investing, which analysed nearly 11,000 mutual funds from 2004 to 2018, found there is no financial trade-off in the returns of sustainable funds compared to traditional funds. Plus, they even demonstrated lower downside risk, experiencing a 20% smaller downside deviation than traditional funds.

Long story short, sustainable investing is just as good for your growth as traditional investing and is even better for social and environmental impact—a win-win in our books. 

How Can You Get Involved?

Do your research and start investing.

If you want to make sure you’re in the realm of ESG-based investing, you’ll have to put on your metaphorical trench coat and grab your magnifying glass to dig a little deeper into where your money is going.  According to a 2021 Price Waterhouse Coopers report, 87% of Australia’s top 200 companies (ASX 200) now publish substantive levels of ESG information. While it’s not always a perfectly regulated and whole picture, it’s a good place to start. You can also visit individual companies' websites for sustainability practices and mission statements to help guide your investing decisions.

When it comes to the actual money side of things, using apps like moomoo can help. These kinds of apps provide a wealth of information about how stocks are performing and investor behaviour can help you make informed decisions about where to put your money from a growth perspective. They'll help you build your portfolio so soon you'll be investing 'like Warren Buffett', with the app providing position and investment info for nearly 6,000 Asset Management Companies, including Berkshire Hathaway Inc. in moomoo's 'Institutional Tracking' feature. Because, while you want your money to do good, you also want it to work for you. 

Participate In Sustainable Investment Research

Lend your thoughts to an industry-first study. Macquarie University and moomoo have partnered to undertake research on what impacts ESG investing in Australia. The study will investigate how sustainable trading education and transparency of company social responsibility credentials impact Australian investor behaviour. If you're keen to contribute, participants can earn up to $500 in engagement rewards in recognition of their time and support. Head over here for more details. 

To find out more about moomoo and  $10 for every $100 you deposit*, up to $50, head over here.

*All investment carries risk. AFSL 224 663. T&Cs apply.

Image credit: Urban List

This article is sponsored by moomoo and proudly endorsed by Urban List. Thank you for supporting the sponsors who make Urban List possible. Click here for more information on our editorial policy.

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