Sustainable Investing for Global Development – Beyond 2015

What are the best online trading brokers for sustainable investing?

After analyzing the CSR activity, ESG rating for assets, and ESG product selection, we have compiled a list of the best sustainable online trading brokers according to the country you are in. Check the links for country specific brokers for sustainable trading:

The importance of sustainability in this economic landscape has initiated massive ongoing efforts to combat environmental degradation, social discrepancies, and many other significant issues worldwide.

The two leading initiatives that are prominent catalysts for solving these issues are Millenium Development Goals (MDGs) and Sustainable Development Goals (SDGs), which are explained in detail below.

UN Millennium Development goals (MDGs)

The MDGs were eight international development goals set by the UN members. They were to be achieved by the year 2015. Put, the MDGs were established in the year 2000 at the Millennium Summit after the United Nations Millennium Declaration.

22 international organizations and 191 United Nations member states agreed upon making the MDGs a reality.

UN Sustainable Development Goals (SDGs)

The Sustainable Development Goals (SDGs) are 17 interconnected global goals that were implemented to achieve a better and more sustainable future for the whole world.

The SDGs were put in motion in 2015 by the United Nations General Assembly (UN GA), and 2030 was set to be the deadline for these goals. As a successor of the MDGs, the SDGs expanded and improved upon the MDGs' pre-existing global framework, which concluded in 2015.

The 17 SDGs essential for the betterment of sustainability across the globe are:

Developing countries such as Indonesia, Thailand, Vietnam, Brazil, and India, among others, have benefitted immensely through the MDGs and SDGs.

What is Sustainable Investing?

Sustainable investing is the investment practice that takes an individual's ethical and moral values towards environment, social and corporate governance (ESG) into account and combines it with traditional investment strategies to determine investment choices.

This form of investing is perfect for investors who want their money to make a positive impact on the world at large and avoid the companies that contribute negatively to the environment and society in the form of massive carbon footprints, low worker wages, etc.

“US Sustainable and Impact Investing Trends,” which is a report by The US SIF Foundation, detected $17.1 trillion in total assets under management at the end of 2019 using sustainable investing strategies. This is a massive 42 percent increase from the $12.0 trillion identified in 2017.

Thus, out of the $51.4 trillion of total US assets under professional management, about 33% of the entire financial distribution involves sustainable investing strategies. This piece of research shows the steadily growing popularity of sustainable investing in this economic landscape.

ESG Index

The Environmental Social Governance Index (ESG) is one of the primary methods used by top investors in this field to filter out proper entities to invest in.

This index evaluates an investment based on the following factors:

1
List Environment: Total energy consumption, pollution, climate change, waste production, natural resource preservation, and animal welfare is taken into account.
lement
2
Social: Human rights, child and forced labor, community engagement, health and safety, stakeholder relations, and employee relations are taken into account.
3
Governance: Quality of management, board independence, conflicts of interest, executive compensation, transparency and disclosure, and shareholder rights are considered.

How is Sustainable Investing Connected to the UN SDGs?

SDGs include major aspirations like providing sufficient food to the poor, promoting gender equality, empowering the illiterate with proper education, creating a stable infrastructure for everyone to access clean, affordable energy, and building more sustainable cities and communities. But to fulfill any of them, a good amount of financial support is required.

Many enterprises and institutions are forming with a focused intention to contribute to social and environmental welfare, but they need capital in order to expand and have a bigger impact. Sustainable investing plays a crucial role in helping these enterprises develop more through funding.

In a nutshell, sustainable investing ensures that private capital is tapped for the growth of budding enterprises in alignment with the SDGs. This, in turn, attracts attention and funding from even more investors while maintaining a decent profit margin.

Types of Sustainable Investing

With lots of investment styles and variations implemented by top financial experts, some of the most prominent types of sustainable investing are explained in detail below.

1. Green Investing

This type of sustainable investment aims to invest in business enterprises that positively impact the environment. Although it shares many similarities with SRI (socially responsible investing) and ESG (environmental, social, governance), the criteria are more specific in terms of investment options, focusing solely on the ecological impact.

Some major green business sectors include:

The renewable energy sector focuses on solutions like solar and wind energy research to make it a more accessible and widely used energy source. The goal is to replace fossil fuels in the coming years ideally. Moreover, the development of battery and energy storage technologies that can integrate these green energy sources is an essential part of this section. Further on, refining and improving pre-existing solar and wind technologies or finding better alternatives to solar panels and wind turbines are additional projects in development.
The material sectors involve research focused on environmentally friendly materials. Some of the avenues being explored in this sector are better alternatives to plastic that are biodegradable and cost-effective, better fertilizers with more natural and organic content, better alternatives to cement with a big carbon footprint, etc.
Companies that are solely focused on the welfare of the environment are one factor. Other companies involved in this type of investing have multiple lines of business. Still, they are engaged in green-based initiatives and environmentally conscious product lines.

2. Socially Responsible Investing (SRI)

This type of investment strategy is based on proactively eliminating candidates that don’t align with the investor’s moral compass. Although ESG is used here, instead of financial prospects, the focus is more on finding potential investments that match the investor’s values, religious inclination, and political beliefs.

For example, investors can detect and weed out businesses supporting firearms production from their investment portfolio if they hold anti-conflict beliefs.

Some prominent negative SRI screens include:

Companies that support the production of harmful substances like alcohol, tobacco, and other addictive compounds.
Companies that support the gambling industry in general.
Companies affiliated with terrorism.
Companies that support the mass manufacturing of firearms and explosives.
Companies that have a sketchy record involving human rights and labor violations.
Companies that have a massive carbon footprint, excess waste production, or any other activity that contributes to environmental damage.
Due to the intense focus on social values while choosing candidates, socially responsible investments tend to mirror the socio-political landscape of the time. This is an essential element to be aware of when predicting the profitability of an SRI investment.

3. Impact Investing

Impact investing is the practice of investing in a particular business entity with a specific social, political or environmental impact in mind.

The prime focus of impact investment is to support a business or an enterprise to help them accomplish beneficial goals for the environment and society.

Often compared with philanthropy, an example of this type of investment would include an investor funding a nonprofit organization that provides free education to children and affordable food for families in an underprivileged part of the world.

To conclude, the process of selecting sustainable investing candidates requires a lot of research. A broker can be hired to make this process easier, but that’s not an option for the general public since their services are really expensive.

Thus, the best option for the general public when it comes to trading is online trading brokers. To sum it up, they make the process of selecting investment opportunities much more manageable and organized for a nominal fee which ranges from 5 USD to 20 USD.

Which Assets are Sustainable in Online Trading?

Here are a few sustainable assets in online trading:

1. Sustainable Company Stocks

One of the most popular and frequent forms of sustainable investing assets includes the stocks of environmentally friendly businesses. Be it companies aiming to provide renewable sources of energy to the masses or companies researching on developing biodegradable alternatives to harmful pollutants such as plastic and other substances.

Investing in company stocks that are committed to the welfare of the environment is a staple choice in this investment strategy.

Some famous Ethical company (an organization that clearly explains environmental, social, and governance rules) stocks include:

First Solar: This company has a considerable influence in the renewable energy sector. From financing solar energy research to constructing and managing big solar energy plants, “First Solar” stands out among the many solar startups. We can easily grant all the credits to their stable finances and steady growth rate.
Emphase Energy: Using individual microinverters on every solar panel they install has given them a significant advantage over their competitors. This is because most competitor companies cluster all of the panels into a single inverter.
An individual inverter for every panel can keep the system going even if one of the panels fails, while that cannot be said about the latter configuration. The effectiveness of their product has led them to install over 40 million inverters on over 1.7 million homes, making them a reliable option to invest in.

2. Sustainable Ethical Funds

Provided by asset management firms, ETFs, mutual funds, and index funds, they are considered a solid investment option in this field due to their broad exposure to many ethical businesses all over the globe.

An example would be investing in a company pioneering in developing more environmentally friendly materials. Ideally, this company would support a good cause while investing in a potential breakthrough that can yield profitable financial returns.

3. Sustainable Cryptocurrency

Bitcoins are based on a proof of work verification system for their blockchain, which involves many calculations and immense processing power to produce coins. Thus, environmentally conscious traders have started exploring cryptocurrencies with a lesser carbon footprint, or in other words, cryptos with more straightforward calculations.

Cryptocurrencies that rely on a proof of stake system have a much simpler calculation process for generating currency. Additionally, alternative green cryptos have fewer transactions daily, making it a perfect choice for sustainable investing.

Some examples of eco-friendly cryptocurrencies include:

Chia: Designed to be less energy-intensive, Chia uses a new concept known as proof of space. This employs hard drives as a means to generate coins instead of bitcoins. Such actions reduce the use of processors that are significantly more energy-heavy.
IOTA: This crypto uses an entirely different framework than traditional mining. Tangle is an alternative system of generating IOTA that can be maintained in smaller devices and has really low energy requirements compared to bitcoins.
Cardano: Developed by Charles Hoskinson, this crypto uses a proof of stake system known as the “Ouroboros”. Such a system enables the user to buy tokens to join the mining network. This alternative method saves a lot of energy compared to the traditional mainstream cryptos out there.

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