Many investors over time have expressed to me that they’d like investments that align with their values, but they don’t want to sacrifice returns to get there.
In a 2026 study, Morgan Stanley found that 92% of global individual investors are interested in sustainable investing, meaning that they’d like their investment portfolios to have a low carbon footprint and align with their personal policy values. However, despite this interest, only 31% of investor portfolios actually are in sustainable portfolios.
To me, this disparity amounts to a lack of investor education around returns and investment options. Investors don’t need to be professional traders selecting individual stocks to align their portfolios with their values. Here is now sustainable investment portfolios work and how they compare with broader market indexes.
There’s More To Investing Than The S&P 500
When investors I speak with have never spoken to advisors before, they often will recite ticker symbols for various funds their friends have told them are great investments. Overwhelmingly, many of the ones I hear amount to one company or the other trying to track the S&P 500. Having several funds all tracking the same index does not amount to diversification and the S&P 500 is not “the market”. It is simply a collection of 500 of the largest companies in the United States, but there is an entire larger world of investments that can be accessed inexpensively and can even align with your values.
Differences Between A Sustainable Portfolio And Standard Index
Sustainable portfolios generally filter out or underweight companies that have a high carbon footprint, involvement in addictive substances, poor labor practices, and lack of diversity. Instead, these portfolios usually have greater exposure to technology, healthcare, and clean energy. A standard index includes no such filters; a company is included strictly based on if it meets the index’s size or sector criteria.
Return Profiles Are Very Similar Between Sustainable And Broad Market-Based Portfolios
Naturally, there are going to be some key differences between a sustainable portfolio and a global index, leading to trading off outperforming years. For instance, if there is a major event that causes oil prices to skyrocket, energy companies with a high carbon footprint that are excluded from the sustainable portfolio might temporarily enjoy heightened returns. We saw such a phenomenon in 2022, and we are seeing it again in 2026.
Overall, though, we’ve seen years of sustainable portfolios beating traditional indexes. Leaders in sustainable investing have largely matched or beat the returns of traditional index investing, making it clear that investors who want to prioritize values-based investing do not need to sacrifice returns to do so.
How You Can Invest Sustainably
As I discussed earlier, you don’t personally need to be an expert trader to align your portfolio with your values. If do want to do your own research to build a diversified sustainable portfolio, I recommend using Morningstar to research funds and ETFs. Morningstar assigns several scores for every fund under their “Sustainability” tab, giving an overall score and breaking down individual factors like carbon footprint, governance on a corporate level, and governance on a world level.
It’s critical to note that just investing in a mutual fund or ETF does not mean you have sufficient portfolio diversification to meet your investment goals. You’ll still want to align your investment portfolio with your financial goal. For instance, if you’re investing in your retirement account, your goal would be retirement planning.
If you’re 35 years old with a goal of reaching financial independence by 60, your risk tolerance may be high. Let’s assume you have an aggressive risk tolerance, and you want to ensure your portfolio is in line with your sustainability goals. In this case, you’ll want to ensure that you have a world-diversified portfolio with exposure to varying company sizes. The end portfolio may be a combination of several funds that you’ll want to rebalance periodically to ensure your exposure continues to align with your goals.
If that all sounds a bit complicated, or like something you don’t want to add to your to-do list, fear not. Most investors can benefit immensely from engaging with a qualified financial planner or portfolio manager to listen to your values and align your investment portfolio accordingly. Qualified financial professionals handle research, risk tolerance assessments, monitoring progress toward your financial goals, tax optimization, rebalancing, behavioral coaching, and more.
Conclusion
Sustainable investing allows investors to align their portfolios with their values without necessarily compromising long-term returns. By focusing on diversification, clear financial objectives, and thoughtful fund selection, investors can build portfolios that reflect both their goals and beliefs. Whether managing investments independently or with professional guidance, sustainable investing is more accessible than ever.
This informational and educational article does not offer or constitute, and should not be relied upon as tax or financial advice. Your unique needs, goals and circumstances require the individualized attention of your own tax and financial professionals whose advice and services will prevail over any information provided in this article. Equitable Advisors, LLC and its associates and affiliates do not provide tax or legal advice or services. Equitable Advisors, LLC (Equitable Financial Advisors in MI and TN) and its affiliates do not endorse, approve or make any representations as to the accuracy, completeness or appropriateness of any part of any content linked to from this article.
Cicely Jones (CA Insurance Lic. #: 0K81625) offers securities through Equitable Advisors, LLC (NY, NY 212-314-4600), member FINRA, SIPC (Equitable Financial Advisors in MI & TN) and offers annuity and insurance products through Equitable Network, LLC, which conducts business in California as Equitable Network Insurance Agency of California, LLC). Financial Professionals may transact business and/or respond to inquiries only in state(s) in which they are properly qualified. Any compensation that Ms. Jones may receive for the publication of this article is earned separate from, and entirely outside of her capacities with, Equitable Advisors, LLC and Equitable Network, LLC (Equitable Network Insurance Agency of California, LLC). AGE-9035315.1 (8/26)(exp. 8/30)