Sustainable share funds: investing for the future

Sustainable investing refers to investments which have been vetted for sustainability, a kind of future proofing. It involves investment in companies that are likely to continue operating successfully in the face of changing social and environmental pressures and will continue to give you returns into the future.

Are sustainable share funds the same as ethical investment?

Ethical investment allows investors to choose funds which reflect their own ethical concerns. Sustainable share funds may include environmentally friendly, sustainable companies, but may also include investment in companies which are considered morally wrong; for example, tobacco companies (although, if smoking continues to decline in popularity and acceptability, this industry may also be less sustainable). Some investment managers feel that ethical investment can compromise returns, but sustainable investment actually ensures (as far as possible!) that returns continue into the future.
Sustainable share funds are not merely the flavour of the month, with "sustainability" being one of the current buzzwords. The underlying idea is investment in companies which are able to adapt and therefore continue to provide good returns, into the future. It is therefore based on a financially sound platform, and social responsibility may or may not go with that.

Advantages and disadvantages of sustainable share funds

Pros

• The clear advantage of investing in a well managed sustainable share fund is that it offers some assurance that your investment will have greater security into the future
• It is actually touted as safer than conventional investing, as all aspects of a company's operation which may affect future stability and ability to perform in the changing social and environmental climate are considered.

Cons

• Sustainable investments, while offering long-term benefits, will not return a higher yield than some non-sustainable investments
• These funds are not suited to investors who wish to consider ethical issues other than sustainability.

Sustainable share fund providers

Sustainable investment funds are quite widely offered. Some examples are AMP Capital Investors and Sustainable Investment.