Sustainable investing is a proactive investment approach that goes beyond traditional financial analysis and includes the environmental, social, and governance (ESG) practices of a company.
Positive Screening: The preferential selection of companies with strong ESG performance relative to their peers—also known as best-in-class screening.
Negative Screening: The exclusion of companies or sectors based on specific ESG criteria such as tobacco, weapons, fossil fuels, or nuclear energy.
Active Ownership: Engaging a company as a shareholder, either formally through resolutions and proxy voting, or informally through direct dialogue.
Thematic Investing: Selecting investments based on a specific theme such as renewable energy, water conservation, and women’s rights.
Community Investing: Investing capital directly into banking and lending institutions that serve low-income and underserved communities.
S&P 500 vs. Sustainable Index Funds
Annual Total Return (%)
Sustainable Index Funds
|S&P 500||Vanguard FTSE
|Calvert Large Cap Index|
Academic and Wall Street* studies have shown a growing relationship between environmental, social, and governance (ESG) practices and superior long-term individual stock performance. But does this competitive performance hold true for a basket (index) of sustainable stocks?
To find out, we compared the performance of the S&P 500 against two sustainable fund indexes: the Calvert Social Index and the Vanguard FTSE Social Index. Although all three indexes invest passively in the overall stock market, the companies selected by the sustainable indexes also meet strict environmental, social, and corporate governance (ESG) standards.
“With performance results being roughly equal, it boils down to one question: Do you want your investments to have the potential to help the planet?”– U.S. Trust
“Investing in sustainability has usually met, and often exceeded, the performance of comparable traditional investments.”– Morgan Stanley
“Responsible Investing: Delivering competitive performance…while pursuing social goals."– TIAA-CREF
From large state pensions to university endowments to ordinary citizens, investors share a common desire to invest in a sustainable way. In the U.S. alone, sustainable investing has become one of the fastest-growing investment trends, with overall assets exceeding $6.5 trillion in 2014—a ten-fold increase since 1995.*
It’s interesting to note that while sustainable investing themes are important factors for many investors, surveys show that it’s wealthy investors, women, and younger people in particular that are driving this trend.*Social Investment Forum, 2014 Report on U.S. Sustainable, Responsible and Impact Investing Trends.
% of investors that consider social, political, and/or environmental factors when making an investment decision
> $10 million