Beginners in sustainable investing should first find out what kind of investor they are. This will help you find your own investment style. Do you just want to get it over with and deal with it as little as possible? You’re in good company: I have many friends who are not too into it, but want to sleep with a clear conscience. Or do you want to see the change you’re trying to be in this world? You’re an Impact Seeker! I have developed four types of sustainable investors, with their own preferences, to help you figure out what will work best for you.
In Step 1, I will help you to figure out into which category you fall or whether you are a mix of different personas.
Disclaimer
As everything else on this blog, keep in mind that the guidance I provide here is just that: guidance. It’s not intended as financial advice in the legal sense, and I am no finance professional. You are ultimately yourself responsible for your investment decisions.
Your situation and financial goals
Before you hurry to start with your first sustainable investment, take a step back and ask yourself – why DO you want to invest? This is important for you to decide what, when and how much to buy, arguably the three most important questions. It determines your ability – or willingness – to tolerate risk, a steady companion of any investor. There are plenty of good guides out there, so I will only cover it briefly. It boils down to the following questions:
- What is your time horizon? It could be short-term (you just have spare money right now that you want to earn interest), medium term (you know you will need it in a few years, say, to buy an apartment) or long-term (you invest with no specific goal in mind or for retirement). The longer, the higher the risk you can take.
- Are you financially secure? A stable, predictable income source provides a buffer, increasing the capacity to take on risk with other assets. Having low regular expenses also helps, while a single earner with kids should be more careful.
- Do you have financial or investing experience? The less experience you have, the more careful you should be with what you invest in.
- What would be your reaction if your portfolio lost 10% value? An investor who would get cold feet and sell her investments at a loss is less willing to take risks than someone who would invest more to take advantage of low prices.
Banks and other service providers will also ask you these questions before offering you an investment product. You can also find tools online that lead you through the process, such as Vanguard’s, but the recommendations (stocks and bonds) are not very helpful for impact investors.
What do you care about?
Since you’re not just in for the money, this question is almost equally important. Knowing your priorities and values will help you find a way to put your money to work in the right way.
Impact vs. Profit – a trade-off?
This question is as old as the Sustainable Investing movement itself. There are plenty of believers who are convinced that sustainability is good business and there is also empirical evidence to back it up. Paul Polman, sustainability guru and former CEO of Unilever sits firmly in this camp. Others take a more nuanced view and criticise some companies’ values-based approach, including Unilever’s. Some reject the claim outright.
I’m with Mr. Polman on this. Sustainability is good business simply because our economy is useless without an intact natural environment and a stable society. But sometimes it takes a lot of time to be proven right. I have seen some firms’ stocks soar by driving the green transition (e.g. ABB), others, including Unilever, have shown lacklustre performance. And I’ve lost a lot of money with former green darlings, such as Beyond Meat.
Similarly, most of my real impact investments have seen at least some defaults from borrowers not able to pay back the money. This reduces overall return substantially. But I happily accept lower returns or higher risk if it makes me feel like I’m actively working towards the world I want to live in. It just feels good!!
You could ask yourself if you would get the same amount of satisfaction from investing in
- …an ETF investing in shares which does not really create any impact but yields 5-7% of growth per year?
- …home renovations which directly reduce emissions and improve people’s lives – but with only 3% net return per year because some might default?
The answer will help you to figure out your priorities. My advice: start by doing both and figure out what works best for you over time.
You may not have to trade sustainability or positive impact for lower financial return or higher risk.
But you should be ready for the possibility.
Second, your values
Your idea of a better world could be one where people don’t eat animals or women really are treated the same as men. Or maybe you don’t really care, as long as no harm is done either. It also helps to know what you DON’T want to invest in.
How much do you have to invest?
The answer to this question will determine your investment budget, but also influence your decision on where to start in Step 2.
The capital you can use for investments depends on both your current wealth, your regular income (or salary for most people) and your recurring living expenses. In general you should make sure two things:
- Ensure you always have enough money to cover 3-6 months of living expenses. This is a general rule of thumb of how much money to keep on your account (as in: not invested). Err on the side of caution on this one: it will help you deal with unforeseen events, such as a big damage you have no insurance for. If you’re not employed or don’t have regular income to cover your living expenses, you should be even more careful.
- For investment as a savings strategy, aim for 10-20% of your take-home pay. This is a popular way of gradually building your portfolio, because it reduces the risk of investing at the wrong time.
Super excited!! or ¯\_(ツ)_/¯: how interested are you?
Are you thrilled by learning about new green innovations? Or do you check your share prices during your coffee break? Then you’re probably willing to spend more time checking up on your portfolio and to seek out new investment opportunities. After all, you’re having fun doing it!!
In my experience, however, most people rather fall into the second category: they feel the need for investing and want it to be for good or at least not bad. If you belong to this group, you will want to invest with as little effort as possible (congratulations for reading my blog nevertheless!).
And finally: figuring out your investor type
Type 1: Keeps it low-effort and straightforward
This investor is not lazy – he just has other interests. He doesn’t love finance, doesn’t follow markets, and doesn’t browse impact platforms for fun. He just wants to feel good about where his money sits — without spending hours on research.
Typical behaviour:
- Buys into one or two simple sustainable products, e.g. a Socially Responsible Investment (SRI) ETF and one vetted impact platform
- Wants diversification without effort
- Avoids complexity, private equity, or early-stage start-ups
- Uses auto-invest features and checks the portfolio 1–3×/year
Type 2: Wants to change the world
She wants to directly see what her money enables—solar panels built, farmers financed, CO₂ avoided. She enjoys being hands-on and feels rewarded when impact reports arrive. She prefers investing over donating to charities, because she wants a financial return. But ultimately, she cares more about the impact than the profit.
Typical behaviour:
- Uses impact-oriented crowdfunding platforms and scours them regularly for new projects she believes in.
- Follows impact metrics
- May test new things, such as private equity, with small amounts to gain experience
- Values transparency over liquidity – it’s ok if she can’t use the money for a longer time.
Type 3: Invests for the (very) long term
The Visionary is motivated by a world that should exist in 2035 or 2050. He wants to back the energy transition, the circular economy, clean mobility, or health tech — not because of detailed financial analyses, but because he believes in these long-term shifts. Ultimately, so his hope, his stock picks will dominate the future economy.
Typical behaviour:
- Picks thematic ETFs, shares of innovative companies that benefit from megatrends and even promising start-ups if he can find them.
- Accepts ups and downs in the market because “the future will reward it”
- Is happy to monitor the portfolio semi-regularly, every few months
Type 4: Uses sustainability to reduce risk
This investor is not primarily driven by emotions, ethics, or “saving the world,” but by the belief that:
- Sustainable companies carry lower long-term risk
- Good governance means fewer scandals
- Megatrends like the energy transition are an inevitable business reality
She wants sustainability because it makes financial sense.
Typical behaviour:
- Likes resilient, low-risk portfolios and therefore chooses ESG-screened or Paris-Aligned ETFs
- Reads banking risk reports rather than impact stories
- Checks portfolios more often than the conscience-driven type, less than the Impact Seeker
Did you find your fit?
If you recognise yourself in one of these personas, this will greatly help you decide on an investing strategy that works for you. It’s also entirely possible that you don’t like to interact with your portfolio most of the time (Type 1) but have moments when you want to change the world (Type 2). You don’t always have to be consistent, as long as you follow the key rules of diversification and don’t buy and sell on impulse alone. Feel like you belong to a different investor group altogether? Tell me in the comments!
Now, are you ready for your first sustainable investment?
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