Originally published in U.S. News & World Report on June 15, 2015 – Updated for clarity and timeliness in 2025.
Sustainable investing has transitioned from a niche interest to a mainstream financial strategy. Once a topic of discussion among a select group, it is now a significant factor in investment decisions, driven by evolving investor values and a growing body of research supporting its viability.
What Is Sustainable Investing?
Sustainable investing involves allocating capital to companies or projects that not only aim to achieve market-rate financial returns but also pursue positive social and environmental impacts. This approach integrates Environmental, Social, and Governance (ESG) criteria into investment analysis and decision-making processes.
Historically, investors focused primarily on financial performance. Today, there's a broader recognition that companies with strong ESG practices may offer better long-term returns by effectively managing risks and capitalizing on emerging opportunities.
The Rise of Sustainable Investing
As of 2024, sustainable investing assets in the U.S. reached approximately $6.5 trillion, reflecting a significant increase from previous years. This growth is attributed to factors such as heightened awareness of climate risks, regulatory developments, and a shift in investor preferences towards more responsible investment practices.
Millennial Influence on Sustainable Investing
Millennials continue to be at the forefront of the sustainable investing movement. A 2024 survey by Morgan Stanley revealed that 96% of Millennial investors are interested in sustainable investing, with many viewing it as a means to align their financial goals with their values.
This generation's commitment is evident in their investment choices and their demand for more sustainable options in retirement plans. Approximately 90% of Millennials expressed interest in having sustainable investment options available within their 401(k) portfolios.
Women's Growing Role in Sustainable Investing
Women are increasingly leading the charge in sustainable investing. Research indicates that 71% of women invest in the stock market, with a significant portion focusing on sustainable investment opportunities.
Furthermore, women are more likely than men to consider ESG factors in their investment decisions, reflecting a broader trend of women driving change in the investment landscape.
The Future of Sustainable Investing
Looking ahead, sustainable investing is poised for continued growth. Factors such as the transfer of wealth to younger generations, increased demand for ESG-compliant investment products, and ongoing regulatory support are expected to contribute to the expansion of sustainable investment practices.
Investors interested in aligning their portfolios with sustainable principles should consider consulting with financial advisors to explore appropriate strategies and investment vehicles.
If you’re interested in exploring how sustainable investing could fit into your overall financial strategy, consider speaking with a professional. At Scarborough Capital Management, our advisors are experienced in helping clients align their investment portfolios with their personal values—without sacrificing performance. Whether you're just getting started or looking to refine your approach, contact a Scarborough advisor today to learn how you can build a portfolio that reflects both your goals and your principles.
Impact investing and/or Environmental, Social and Governance (ESG) takes into consideration factors beyond traditional financial information to select securities, which could result in relative investment performance deviating from other strategies or broad market benchmarks, depending on whether such sectors or investments are in or out of favor in the market. Further, ESG strategies may rely on certain values-based criteria to eliminate exposures found in similar strategies or broad market benchmarks, which could also result in relative investment performance deviating.