This is a guest blog by Harshit Garg, Head of Investments at Pyse.
5 steps to sustainable investing
Businesses, governments and people around the world are embarking on a collective journey to net zero and we are all busy leveraging our resources. Your money is no exception!
Sustainable investments have the amazing power to create a cleaner, greener future while generating impressive economic returns.
However, the rapidly changing ESG landscape has left investors with no choice, with a wide range of sustainability investing approaches and options available. Here are his five steps to navigate your sustainable investing options and start investing today.
- Identify your emissions and plan your transition to sustainability
Know your goals when investing sustainably! It’s important to map out your sustainability goals before you invest. The first step for this is to determine the total emissions produced by our daily activities. The resources needed to reduce our carbon footprint can usually be summed up in two factors: behavioral and monetary. Behavioral changes, cycling/public transport choices, moving to LED lights, etc. can lead to immediate reductions in carbon footprint. A financial shift means investing money in companies/projects that perform well on sustainability parameters and contribute to carbon sequestration or even removal. A good indicator of such activity is the “E” part of his ESG report for a company.
- Determine your investment goals and examine your current portfolio
Here are three general goals that help define our approach to sustainable investing.
- Sustainable investments can be addressed as portfolio constraints to ensure all investments are aligned with sustainability goals
- Maximize the sustainability factor of your portfolio by investing in companies that have a direct positive impact on the environment
- For investors looking to dive deeper into the world of sustainable investing, compare companies’ ESG ratings, identify funds with lower ESG risks, and invest to reduce their exposure to long-term economic threats to their health. recommended. An alternative to this is investing in funds that allocate these funds directly to environmentally friendly activities.
We have set our sights on sustainable investing goals and approaches! The next step is to review your current portfolio and see how sustainable investment goals can be incorporated into it.
You can start by identifying the proportion of portfolios that meet ESG criteria and the asset classes in which these funds are included. Review your portfolio to see how the companies and projects you invest in are connected to your climate impact. Align your portfolio with low carbon goals. Now we also need to start thinking about companies that do not fit sustainability, how to weed them out and where to reallocate capital.
3. Screening available sustainable investment options
As you navigate the various sustainable investment options available, focus on weeding out the bad with negative screening and focus on funds that demonstrate efforts towards a sustainable shift.Portfolio can be categorized into the following investment classes:
Equity fund: India has multiple ESG funds such as SBI Magnum ESG Fund and Axis ESG Equity. These funds allocate investments to companies that perform well on ESG parameters. Returns from these investments are subject to market movements, but the environmental impact of such funds remains uncertain.
Alternative investments: There are companies that allow investments in fixed income assets that are not market dependent. The environmental impact of such investments is typically much more direct and visible to investors. Pyse is a start-up that allows private investors to own a portion of green assets such as solar power plants, EVs and plantations. Because these investments are asset-backed, returns on these assets are much more stable than his ESG funds. The after-tax rate of return offered by such sustainable assets can reach 12%.
Four. Plan your transition to a sustainable portfolio
We have reviewed sustainable investing goals, approaches and available investment options. The next step is to start planning the transition to a sustainable portfolio.
Let’s say your desired sustainable investment goal is to reduce the carbon footprint of your portfolio. When evaluating our current portfolio, we notice investments directed towards companies with high-risk carbon scores. We can now filter out these companies and reallocate capital to his ESG funds or green assets like those offered by Pyse, leading to carbon and carbon emissions reductions.
As you transition, be sure to consider your overall risk and return objectives, as well as the tax implications of reallocating capital.
Five. Track and adapt
Now that we’ve changed our investment strategies to grow our money while making an impact to support the transition to a greener world, it’s time to track the return and impact of these funds and assets. Technology and investment opportunities pop up every day for you to explore. Use this knowledge to update your strategy as needed to make it sustainable and financially efficient.
Invest sustainably in urgent climate action
In an era of dire climate change, we are all looking for ways to take action and make a positive impact on our planet. Sustainable investing can open an easy, affordable and profitable path to impactful climate action! Transform your portfolio with the steps above and start investing sustainably today. let’s