It’s not easy to be positive about the future of the planet and its inhabitants. The 21st century appears to have delivered a perfect storm of economic uncertainty, social upheaval & environmental change. Many of us are questioning whether the traditional approach to investment, which has advocated the accumulation of wealth at almost any cost, is too one dimensional. Can such a single minded objective really insulate you from the many issues we are all facing? Perhaps a broader strategy which seeks to invest for social and environmental benefit as well as profit should have a place in your portfolio.
Aligning your social values with your money
One option is to embrace different motivations and invest in what you believe in. In recent years, more and more people are looking for their money to ”do good while doing well”. The emergence of impact investing – financial instruments that produce significant social or environmentalbeliefs, alongside a potential attractive financial return – provides an opportunity for people to become reconnected. Not just to their money, but also to the social and environmental impacts that this has.
Global issues, global opportunities
One previous criticism of investing ethically or sustainably is that returns had to be sacrificed. However, this assumption is increasingly being challenged. A recent benchmark study from Cambridge Associates shows the opposite to be true. Indeed, the positive impact approach itself favours companies that are trying to do good and run their businesses in a sustainable manner. Furthermore, they tend to operate in emerging sectors with high-growth potential.
Impact investing is becoming more and more accessible to investors with over 500 investment funds to choose from. A number of new funds have been launched over the past 2 years, widening the access of positive investments to all asset classes. Not only are these funds driving innovation in the sustainable investing space, but as more asset managers get involved the competition increases, we are seeing a downward pressure on fund costs, directly benefiting investors.
Is it for everyone?
Impact investments can usually be held within an ISA, an Investment Account and Pension tax wrappers. Today there is a real opportunity to create a more integrated view of finance where you can align your money with your values not only because that makes sense, but also because it is critical to building the kind of world we want to live in.