Jeff Bartel
Chairman and Managing Director
With a quick look at today’s headlines, it is unsurprising that some investors want their money going to the exact causes driving news stories on social and environmental value creation. These investors seek profits from their investments, but they also want to know that they play a role in making positive changes globally or in communities.
From climate change to social justice issues, sustainable, responsible impact investment options are plentiful and warrant a closer look at their rise and growth.
The Rise of Sustainable, Responsible Impact Investing
Sustainable, responsible impact investing supports investment in stocks, bonds, securities, and other projects from organizations that focus on social, environmental, and governance issues. Some of the most popular options involve companies expressing interest and concern on climate change, social justice, poverty eradication, end to geopolitical conflicts, and sustainable natural resources.
Funding in sustainable, responsible impact investing has increased significantly from around $3T in 2010 to $16.6T in 2020. This growth is expected to continue, with experts predicting this sector will grow to $50T by 2025.
One of the biggest trends in sustainable, responsible impact investing is that it is now attracting the attention of all investors, even those without a particular interest in these issues. Unfortunately, this has resulted in greenwashing, with increased investment options falsely claiming to invest in these issues. Therefore, it is vital for investors to thoroughly vet all sustainable, responsible impact investing opportunities before investing.
Demographics Demanding Sustainable, Responsible Impact Investing
Millennial investors have been the driving force behind sustainable, responsible impact investing for years. Today, this has all changed. Not only are younger generations also interested in investments that work towards making a difference in the world, but there has also been an increase in investments from both Gen X and baby boomer generations.
Perhaps most surprising is that Millennial and Gen Z investors are occasionally willing to absorb some loss in their returns if these investments propel worldwide changes in diversity, income equality, climate change, renewable energy, and carbon emissions reduction. For example, one study shows that investors under 41 years old are willing to lose as much as 10% of their investments to bring improvements to society and the planet.
Climate Change Is Driving Sustainable Impact Investing
Climate change is one of the top issues for sustainable, responsible impact investors. Due to this popularity and multiple climate change concerns, there is a vast diversity of investment opportunities available, such as green bonds, green real estate, alternative energy, emissions reductions, and advanced technology, such as water technology.
With the increase in climate change investment opportunities and the rise in greenwashing, today’s investors are taking the time to research and track companies before investing; these investors seek transparency and results.
Responsible Impact Investing in Agriculture
Agriculture is another popular sector for sustainable, responsible impact investing. For example, food insecurities are a growing concern for global leaders and investors interested in sustainable, responsible impact investing. In addition, as climate change continues to impact some of the poorest nations in the world, there is a strong likelihood that investments in responsible agriculture will continue to grow.
Impact investing in sustainable agriculture focuses on investments involving sustainable farming practices, land conservation, and organic farming practices free from chemicals and dangerous pesticides. Social equality issues affecting agriculture, such as gender diversity and child labor laws, are other standard options within the agriculture sector.
Reducing Global Conflict with Sustainable, Responsible Impact
The Ukraine-Russian conflict has certainly heightened investors’ interest in responsible impact investment involving geopolitical conflicts. In 2020 alone, over 80 million people were displaced worldwide due to various issues. In many countries, such as the United States, where investors have limited options to help in these conflicts making responsible impact investments is an ideal alternative.
However, these investments should not be made in haste. Instead, investors should take the time to research each fund or company they are considering investing in to precisely see what it uses the funds for, such as political activities or refugee support. This extra step ensures your investment is going towards the causes you care about most.
While sustainable, responsible impact investing was primarily in the hands of Millennials not long ago, that has all changed. Investors from all generations, walks of life, and investment goals are starting to make this type of investment a part of their overall portfolios. Sustainable, responsible impact investing provides a way to diversify your investment portfolio. First, however, it is essential to research and ensure you are investing in the right organizations.
