Money·2 min read

ESG, Greenwashing, and More: Sustainable Investing Terms You Need to Know

Sustainable investing terms over a background of money
Design: theSkimm | Photo: iStock
Mar 25, 2022

Investing can be about more than building your wealth and reaching your financial goals. It can mean using your dollars to make the world a better place (whatever that looks like to you). Sustainable investing — i.e. considering environmental, social and corporate governance factors while building your portfolio — is one way to make your money align with your morals.

Where money meets mindfulness, there’s some lingo you need to know.

Consumer activism

Taking a stand with your spending. Aka buying from brands that align with your values and boycotting ones that don’t. The goal: to support businesses that share your beliefs and pressure others to change their practices.

Impact banking

A way to support underserved communities. Depositing funds with a socially responsible bank can help bridge gaps in local housing, jobs, and education. Look for designations like Community Development Financial Institution (CDFI) or Minority Depository Institution (MDI).

ESG

Short for “environmental, social, and governance.” It’s a set of criteria used to evaluate companies you might want to invest in. Like businesses that minimize waste or don’t test on animals.

Sin stock

Like ESG’s evil twin. These are shares of companies that are involved in biz some consider problematic. Think: alcohol, tobacco, weapons, gambling, or adult entertainment. Bundled together, they make what's known as "vice funds."

Greenwashing

When companies say one thing and do another with their environmental promises. It often comes in the form of misleading marketing (example: "biodegradable" straws that aren't). But it can also sneak into your investments when fund managers fail to keep eco-friendly promises. See also: pinkwashing and social washing.


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