Building a Green Portfolio: Best Practices for Social Enterprises

As the world shifts towards sustainability, social enterprises have a unique opportunity to lead by example in building green investment portfolios. Here are some best practices to guide your organisation in developing a portfolio that not only yields financial returns but also drives positive environmental impact.

Start by clearly defining what sustainability means for your enterprise. Set specific, measurable goals that align with your mission, such as reducing carbon emissions, supporting renewable energy, or promoting biodiversity. This clarity will guide your investment decisions and help you stay focused on your objectives.

Diversification is key to managing risk and maximising impact. Consider a mix of asset classes, including green bonds, renewable energy projects, sustainable agriculture, and eco-friendly technologies, for example. This approach not only spreads risk but also enhances the resilience of your portfolio against market fluctuations.

Perform rigorous due diligence on potential investments to ensure they meet your sustainability criteria. Evaluate the environmental impact, financial viability, and ethical practices of each opportunity – remembering ‘Triple Bottom Line’ methodology. Look for investments that provide transparent reporting and have a proven track record of positive impact.

Use expert sources of advice and seek out wealth management and advisory expertise when making investment decisions – noting that all forms of investment leave your capital at risk.

Collaborate with other impact investors and stakeholders who share your sustainability goals. Networking with like-minded organisations can provide valuable insights, open up new investment opportunities, and foster partnerships that amplify your impact.

Regularly monitor the performance of your investments against both financial and environmental benchmarks. Transparent reporting is crucial for maintaining credibility and attracting future investors. Use established frameworks like the Global Reporting Initiative (GRI) or the Impact Reporting and Investment Standards (IRIS) to communicate your progress effectively.

The field of sustainable finance is rapidly evolving. Stay informed about new developments, emerging trends, and regulatory changes. Being agile allows your enterprise to adapt and seize new opportunities as they arise.

References

Morgan Stanley Institute for Sustainable Investing, 2020. Sustainable Signals: New Data from the Individual Investor. Morgan Stanley. Available at: https://www.morganstanley.com/pub/content/dam/msdotcom/ideas/sustainable-signals/pdf/Sustainable_Signals_Report_2020.pdf.

Global Impact Investing Network, 2019. Annual Impact Investor Survey 2019. GIIN. Available at: https://thegiin.org/assets/GIIN_AnnualImpactInvestorSurvey_2019_Web_Final.pdf.

United Nations Environment Programme Finance Initiative, 2020. The Guide to Banking and Sustainability: Edition 3.0. UNEP FI. Available at: https://www.unepfi.org/publications/banking/sustainable-banking-guide/.

World Economic Forum, 2020. Sustainable Development Investment Partnership: Mobilising Finance for Development. WEF. Available at: https://www.weforum.org/reports/sustainable-development-investment-partnership-mobilizing-finance-for-development/.