Ethical and Sustainable Investing
Expert-defined terms from the Professional Certificate in Islamic Finance and ESG Investing course at London School of Business and Administration. Free to read, free to share, paired with a globally recognised certification pathway.
Ethical and Sustainable Investing #
Ethical and Sustainable Investing, also known as Socially Responsible Investing… #
This type of investing takes into consideration environmental, social, and governance (ESG) factors in the investment decision-making process.
Concept #
Ethical and Sustainable Investing involves selecting investments based on ethica… #
It also considers sustainability factors, such as a company's carbon footprint, labor practices, and diversity policies.
- Socially Responsible Investing (SRI): An investment strategy that considers bo… #
- Socially Responsible Investing (SRI): An investment strategy that considers both financial return and social/environmental impact.
- Environmental, Social, and Governance (ESG) Factors: Criteria used to evaluate… #
- Environmental, Social, and Governance (ESG) Factors: Criteria used to evaluate a company's sustainability and ethical practices.
- Impact Investing: Investments made with the intention of generating positive s… #
- Impact Investing: Investments made with the intention of generating positive social or environmental impact alongside financial returns.
Explanation #
Ethical and Sustainable Investing involves aligning investment decisions with pe… #
This approach allows investors to support companies that are making a positive impact on society and the environment while still seeking competitive financial returns. By considering ESG factors, investors can assess the long-term sustainability and ethical practices of companies before making investment decisions.
Example #
An investor interested in Ethical and Sustainable Investing may choose to invest… #
By doing so, the investor is not only seeking financial returns but also contributing to the transition towards a more sustainable future.
Practical Applications #
Ethical and Sustainable Investing can be applied across various asset classes, i… #
Investors can use screening criteria to exclude or include companies based on their ESG performance. They can also engage with companies through shareholder advocacy to encourage better ESG practices.
Challenges #
One of the challenges of Ethical and Sustainable Investing is the lack of standa… #
Another challenge is the potential trade-off between financial returns and social/environmental impact, as some ethical investments may underperform financially compared to traditional investments. Additionally, there may be a limited selection of investment options that align with an investor's specific values and beliefs.