Investing means going beyond the quantitative means of measuring financial success. To many, especially Gen Z, it also means investing in their values and making a positive impact on the world. As a result, there are long-term, socially conscious, and impact investment philosophies that enable an investor to finance their values and, at the same time, earn worthwhile returns.

Sustainable Investing

The goal of sustainable investing is to manage the process of investment while considering ESG criteria. Using finance, the idea is to pinpoint companies that show good financial performance while practicing sustainability strategies and policies.

For example, sustainable investment may mean picking firms that:

• Reduce carbon emissions and become eco-friendly. 
• Increase diversity in  their workforce.
• Assure accountability and equitable transactions.

Investors in these businesses support sustainable development goals, such as mitigating climate change upholding human rights, and promoting sound corporate governance.

Socially Responsible Investing (SRI)

SRI takes this concept a step further by screening out firms involved in businesses that would not be considered socially responsible. Frequently using a values-based filter, this method stays away from sectors like:

• Manufacturing of tobacco and alcohol.
• Mining fossil fuels.
• Production of weapons.

Additionally, SRI focuses on financing industries including education, healthcare, and renewable energy. When selecting SRI strategies, investors consciously signal what type of companies they want to support or ban.

Impact Investing's Rise

Since impact investing seeks to provide both financial returns and social and environmental benefits, it is typically regarded as the highest kind of value-based investment strategy. Impact investment, as opposed to sustainable and socially conscious investing, gives preference to businesses or initiatives that directly solve urgent problems, like:

• Housing projects for low-income groups in society.
• Renewable energy projects and policies in developing countries.
• Global ideas towards the enhancement of health.

More than half of venture capital funds are invested in companies that are start-ups or in initiatives that are intended to make a difference.

Why Gen Z Is Leading the Shift

Gen Z is a generation that can understand the problems in the world today, including climate change, social issues, and inequalities in the global economy. They are living these values through their money, and they are using their investment dollars to make a difference.

Gen Z is adopting sustainable investment for the following main reasons:

1. Awareness: Since Gen Z has the information and leverage of social media, they have more knowledge about corporate affairs and their consequences.
2. Purpose-Driven Goals: This generation cares more about creating an impact, and many will consciously choose to work for social impact rather than wealth.
3. Technology: In the past few years, digital investment platforms and apps have enabled young investors to invest in shares based on their preferences.

How to Get Started

Here are some practical steps for Gen Z investors who want to match their investments with their values:

1. Research ESG Funds: ESG investing is now mainstream as there are many mutual funds and ETFs that pay attention to these factors but do not necessarily have costly impact investing strategies.
2. Use Robo-Advisors: Most online platforms, including Betterment and Wealthsimple, include ESG options within specific client interests.
3. Analyze Impact Reports: Examine the sustainability reports of different companies as to how they start and what they achieve.