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MARKETS & INVESTING

How to Assess the Sustainability of Your Investments

Answering several key questions can help you measure sustainability and impact in investing.
Jun 6, 2024  |  2 minute read
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While most of us can easily find the market value or performance track record of a stock or bond we are invested in, understanding the sustainability characteristics of your investments is less standardized and often confusing.

Investors can use a range of different sustainable investing strategies across asset classes in their portfolio. As more investors start to incorporate these environmental, social, and governance (ESG) and impact products, it’s important to be able to assess how these investments align with your values and achieve your unique impact goals.
We recommend you consider the following questions when selecting and interpreting the sustainability metrics related to your investment portfolio:

 

What Am I Measuring?

  • Clarifying your unique sustainable investing goals will be key to helping you navigate the multitude of data points related to the investments in your portfolio. For example:   
    • Are you interested in avoiding or overweighting investments in certain industries?
    • Are you interested in promoting diversity? 
    • Are you interested in investing in companies providing environmental solutions?
  • Just because you can measure it, doesn’t mean it always matters. This may mean considering different metrics for investments in different sectors (e.g., an information technology company vs. an energy company) or investments in different asset classes (e.g., public equity vs. private equity). 

 

How Am I Measuring It?

  • Avoid blended scores or ratings. Many investors’ first exposure to sustainability metrics is a score or rating that assesses a combination of environmental, social, and governance (ESG) factors. Although concise on paper, these scores require lengthy explanation, can be quite opaque, and importantly, can vary significantly depending on who is providing the score.
  • We recommend focusing on specific data points that are important to you and meaningful to your portfolio, such as revenues from potentially objectionable business activity or carbon emissions.

 

What Is the Relevant Time Horizon to Evaluate?

  • In the same way you would consider short-term and long-term goals when evaluating the financial performance of your portfolio, apply that logic to assessing sustainability metrics.
  • When available, we recommend evaluating both historical and forward-looking data points related to environmental and social risks and opportunities across your portfolio.

If you are interested in learning more about how to navigate the sustainability characteristics of your investment portfolio, please reach out to your Goldman Sachs private wealth advisor.

More Sustainability Insights

Last Revised: June 2024
 

This material is intended for educational purposes only and is provided solely on the basis that it will not constitute investment advice and will not form a primary basis for any personal or plan’s investment decisions. While it is based on information believed to be reliable, no warranty is given as to its accuracy or completeness and it should not be relied upon as such. Goldman Sachs is not a fiduciary with respect to any person or plan by reason of providing the material herein, information and opinions expressed by individuals other than Goldman Sachs employees do not necessarily reflect the view of Goldman Sachs. This material may not, without Goldman Sachs’ prior written consent, be (i) copied, photocopied or duplicated in any form, by any means, or (ii) distributed to any person that is not an employee, officer, director, or authorized agent of the recipient. This material is not an offer or solicitation with respect to the purchase or sale of any security in any jurisdiction. Investing involves risk, including the potential loss of money invested. Past performance does not guarantee future results. Neither asset diversification or investment in a continuous or periodic investment plan guarantees a profit or protects against a loss. Information and opinions provided herein are as of the date of this material only and are subject to change without notice.

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