What is sustainable investing?

Sustainable investing is best defined by incorporating environmental, social, and governance (ESG) factors into investment decision-making processes. This approach recognizes that financial performance is not the sole indicator of a successful investment; rather, understanding and evaluating the impact of companies on the environment, their social responsibility, and their governance practices is crucial in order to achieve sustainable returns.

Investors who practice sustainable investing seek to align their portfolios with their values, aiming for investments that contribute positively to society and the planet, while also managing risks associated with ESG factors. This multifaceted approach allows investors not only to aim for financial returns but also to promote long-term sustainable development.

The other options demonstrate a misunderstanding of the principles of sustainable investing. Focusing solely on financial returns neglects the significant role that ESG factors play in risk assessment and can lead to poorer long-term performance. Ignoring social and environmental risks overlooks critical aspects that can influence the viability of investments, particularly in a world increasingly affected by climate change and social issues. Similarly, prioritizing short-term gains contradicts the essence of sustainable investing, which emphasizes long-term thinking for enduring financial and social outcomes.