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What Is Sustainable Investing?

15 February 2024

You could say that the future of our planet and society is increasingly intertwined with our financial decisions. Whilst generating a financial return is one of the main reasons to look at investing your hard-earned money and boosting your savings and financial goals, have you ever thought about the impact of this on the environment and society? If not, you may want to look at your approach a little differently. This is where sustainable investing has become a popular way to do things.

But what exactly does sustainable investing entail, and do you have to do anything differently than you would normally do?

As a direct lender of short term loans, we know that sometimes investing your money can be difficult, especially when a financial emergency suddenly appears. Like any financial decisions, you need to do what’s best for your financial wellness. When it comes to investments, they always need to be carefully considered, so if you do decide to look further into sustainable investment options, be sure to consider your current finances and situation first.

What Is Sustainable Investing? – A Brief Explanation

Sustainable investing involves making investments in companies or funds that aim to generate not only financial returns but also positive social and environmental impact. This approach contrasts with traditional investment strategies that focus solely on financial returns, often overlooking the broader impacts on society and the environment.

Also known as Environmental, Social, and Corporate Governance (ESG) investing, the concept is nothing new but has seen growing popularity in recent years. According to Bankrate, around 88% of public companies have ESG initiatives in place and 89% of investors consider this before going ahead.

The landscape of sustainable investing is dynamic, shaped by evolving investor interests and new regulatory frameworks. As investors increasingly seek to align their portfolios with their values, sustainable investing is becoming an essential part of the global financial conversation. In 2022, the sustainable finance market was valued at $4.2 Trillion and is projected to grow over the next decade.

However, it’s worth noting that last year many investors pulled their money from ESG funds and moved them elsewhere, with it reported in May 2023 that £1 billion worth of ESG investments were moved into other options. When it comes to any form of investing, there are plenty of ups and downs to consider.

Now, we know investing can be confusing at the best of times, so we’ll look at the basics of sustainable investing, why it’s important, and how it can be a part of your investment strategy to boost your finances in 2024 and beyond.

How Can Sustainable Investments Help You?

Sustainable investing offers a pathway to align our financial goals with our ethical values. This form of investing isn’t just about growing your money but shaping a better future for both the planet and future generations. Young people in particular are increasingly conscious of their impact on the planet and society, so for young adults and even children, sustainable investing can be a powerful tool for financial planning.

Many people want to contribute to a world that is healthier, more equitable, and sustainable, so this is one way to do your own small part while at the same time potentially boosting your finances. If you can invest in companies that prioritise things like environmental initiatives and social responsibility, young investors can play a part in driving positive change, while also planning for their long-term financial security.

The rise of sustainable investing has been particularly noticeable among younger generations, such as Millennials, who are often more inclined to invest in companies that reflect their environmental and social values. In fact, a 2021 survey by Morgan Stanley found that 99% of millennials were interested in sustainable investing. Here in the UK, 77% of investors are likely to invest ethically, with Gen Z investors (66%) most likely to.

This trend appears to be a fundamental shift in how investments are perceived and managed. By choosing sustainable investments, young people are not only helping their financial future but are also playing a crucial role in addressing global challenges like climate change, social inequality, and corporate governance.

Why is Sustainable Investing Important to people?

The significance of sustainable investing extends beyond individual financial gains; it plays a crucial role in addressing some of the most pressing global challenges of our time.

One of the key reasons sustainable investing is important is its potential to direct funds towards addressing environmental issues, such as climate change, and social concerns, including inequality and community development. Companies that prioritise environmental sustainability and social responsibility are attractive to many investors, and in return are effectively supporting and encouraging these practices. 88% of consumers will be more loyal to companies that support these initiatives, so it can even lead to more responsible corporate behaviour and positive societal change.

In the context of the current financial landscape, sustainable investing offers a more holistic approach. It allows investors to align their financial objectives with their values and the broader goal of sustainable development. In 2022, investors placed the equivalent of over £100 million each week into sustainable funds, a total of £5.4 billion.

However, the phenomenon of greenwashing is still widespread, and it’s important to consider that not all companies do as they say. Greenwashing is where companies make misleading, vague, or untrue claims about their commitment to environmental and societal issues, saying they support these initiatives, but in fact, do not or inflate their involvement. Why? Well, simply because sustainability is a hot topic, and some want to take advantage of consumer interest.

Sustainable Investments For A Better Future

Sustainable investing represents more than just a financial strategy – it’s a commitment to a better future overall. By aligning investments with values that support environmental sustainability and social responsibility, investors contribute to a world that is more ethical, equitable, and environmentally sound.

Whether you already have existing investments or are thinking about exploring this more as part of your wider financial goals, sustainable investing offers a path to not only grow wealth but also make a positive impact on the world. Not only can you take care of your financial health but also contribute to the health of our planet and its communities – who wouldn’t want that?

For more information on investing, Money Helper has a beginner’s investment guide. To discover more insights, please visit our blog, where you can learn how to spot fake text and call scams, as well as our guide to breaking down budgeting myths.

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