Sustainable investing goes by different names including Responsible Investing, Socially Responsible Investing (SRI), and ESG Investing. The term refers to a comprehensive investment approach that goes beyond financial analysis and includes the environmental, social, and governance practices of a company. Sustainable investing evaluates and engages companies in the following ways.

	Screening
Including or excluding investments based on environmental, social, and governance criteria.

	Active Ownership
Exercising your right as a shareholder by voting and actively engaging management.

	Impact Themes
Targeting sectors with the greatest potential for ecological and social impact.

You don’t have to compromise financial performance to invest sustainably. On the contrary, an overwhelming majority of studies show that sustainability and outperformance can often go hand-in-hand.¹

	Performance
Funds with high sustainability ratings tend to have a greater proportion of companies with strong balance sheets, above-average returns and structural competitive advantages.²

In 2024, 47% of sustainable equity funds beat the performance of their Morningstar Category 5-year average. — Morningstar

	Volatility
In years of high volatility, sustainable funds across all asset classes have shown greater stability and reduced volatility than their traditional peers over the long-term.³

80% of institutional investors cite portfolio risk reduction (e.g., lower tail risk, lower volatility, higher sharpe ratios) as their reason for practicing sustainable investing in 2024. — Morgan Stanley

	ESG Risk
Sustainable funds have significantly lower ESG risk because they intentionally tilt their portfolios toward ESG leaders and away from laggards.⁴

At the end of 2024, nearly three-fourths (72%) of sustainable funds received the highest ratings (4 or 5 globes, out of 5), compared with 27% of funds overall. — Morningstar

Sources:

¹ Financial Performance with Sustainable Investing, USSIF: The Forum for Sustainable and Responsible Investment
² Morningstar 2024 Sustainable Funds Landscape Report (pdf)
³Sustainable Signals: Institutional Investors, Morgan Stanley (pdf)
⁴Morningstar 2024 Sustainable Funds Landscape Report (pdf)

Environmental

Conservation

Companies that promote sustainability and ecological conservation such as recycling, low-carbon emissions, and efficient water use.

Clean Tech

Companies that specialize in resource efficiency and clean energy solutions such as wind, solar, and geothermal.

Animal Welfare

Avoids or restricts companies engaged in the inhumane treatment of animals such as medical testing and factory farming of livestock.

Fossil-Fuel Free

Avoids companies that produce energy from coal, crude oil, petroleum, and gas—the main contributors of greenhouse emissions and climate change.

Social

Equality & Diversity

Companies that actively hire and promote diverse workforces that include LGBT, veterans, women, and other minorities.

Fair Labor

Companies that promote fair wages, safe working conditions, and long-term job security.

Human Rights

Avoids or restricts companies that do business in countries which condone human rights violations or support terrorism.

Non-Violence

Avoids or restricts companies that profit from manufacturing firearms, ammunition, or military weapons.

Healthy Living

Avoids or restricts companies involved in manufacturing or distributing harmful or addictive products such as tobacco, alcohol, and gaming.

Community Development

Financial institutions that partner with underserved communities to provide affordable housing, small business loans, and microfinance.

Governance

Corporate Governance

Companies with strong policies and practices governing transparency, fair compensation, and open dialogue with shareholders.

Shareholder Advocacy

Engages the companies it owns through the use of proxy voting, resolutions, and dialogue, to promote environmental, social, and governance change.