For young adults, sustainable investing isn’t just a trend—it’s a way to build wealth while staying true to their values. Whether it's addressing climate change, promoting workplace diversity, or supporting ethical supply chains, your investment portfolio can now reflect what you care about.

What Is ESG Investing?

ESG investing involves evaluating companies based on three core pillars:

• Environmental: carbon emissions, renewable energy use, pollution, water usage, biodiversity

• Social: employee treatment, community impact, product safety, diversity and inclusion

• Governance: executive pay, board diversity, transparency, corruption prevention

Rather than investing in companies purely based on profit, ESG investors aim to support those that act responsibly while avoiding firms that are harmful or exploitative—such as weapons manufacturers, tobacco firms, or fossil fuel giants.

Why It’s Gaining Momentum Among Young Investors

1. Values-Driven Generations

Millennials and Gen Z are widely regarded as the most socially conscious generations yet. From climate activism to social justice, young adults are demanding accountability from the brands they buy from—and the companies they invest in.

ESG investing lets you “vote with your dollars,” applying pressure on companies to improve their practices by rewarding those that align with ethical or sustainable standards.

2. Comparable or Better Returns

Contrary to old assumptions, ESG investing doesn’t mean sacrificing returns. A growing body of research shows that companies with strong ESG practices often outperform their peers over the long term. They tend to be better managed, more resilient to reputational risks, and more aligned with future-facing regulations and consumer demand.

Morningstar data (2024) indicates that more than half of ESG funds outperformed non-ESG peers over a 5-year horizon—proving that doing good and doing well aren’t mutually exclusive.

3. Increased Product Availability

There are now more ESG options than ever. In Australia, popular ETFs and superannuation funds now offer sustainable investment choices, including:

• BetaShares ETHI – global ethical ETF excluding fossil fuels, tobacco, and weapons

• Vanguard Ethically Conscious International Shares ETF (VESG)

• Australian Ethical Super – a superannuation fund committed to strict ESG screening

• Spaceship Voyager’s Universe Portfolio – invests in future-focused, innovative companies with ESG screens

How to Start ESG Investing

1. Choose an ESG-Focused Fund or ETF

Look for products that clearly outline their ESG criteria and exclusions. Use platforms like the ASX, Morningstar, or Canstar to compare options based on sustainability rankings, performance, and fees.

2. Review Your Super Fund

Your superannuation is likely your biggest investment—so make sure it aligns with your values. Many funds now offer ethical or sustainable investment options, and switching is easier than you think via myGov.

3. Understand Greenwashing

Be cautious of funds or companies that claim to be ethical without providing real transparency. This is known as greenwashing. Always read product disclosure statements (PDS) and look for independent ESG ratings from trusted third parties like MSCI or Sustainalytics.

Common Myths Debunked

• “ESG investing means lower returns.”
  Not necessarily. Many ESG funds have outperformed traditional benchmarks in recent years.

• “It’s too expensive.”
  ESG ETFs can have management fees as low as 0.25%, similar to mainstream ETFs.

• “It’s just a fad.”
  Regulatory bodies, pension funds, and global institutions are embedding ESG into long-term investment frameworks. This shift is structural, not superficial.

Final Thoughts

Sustainable investing allows you to align your money with your values, future, and vision for the world. For young investors looking to make a difference, ESG is more than a buzzword—it’s a strategy that recognises that financial health and social responsibility can go hand in hand.

By choosing ESG-focused funds, reviewing your superannuation, and being mindful of greenwashing, you can start building a portfolio that feels good and performs well.