Investment products that embrace Environmental, Social and Governance (ESG) concepts are included in our in-house model portfolio offerings as part of our ‘normal management’ of risk and return. For clients who wish to go a stage further and fully embrace Impact investing we have formed an external alliance with a specialist third party investment manager. The in-house and outsourced approaches are both fully discussed with our clients in order to ascertain which option best fits their individual requirements. A mixture of the two is also possible. So, what exactly is Impact investing?
Impact investing aims to invest in businesses that have developed innovative solutions to large and growing societal and environmental challenges such as climate change, access to education or clean water. It’s estimated that we need 5-7 trillion USD of additional investments every year to tackle the most pressing issues called the UN Sustainable Development Goals. The UN Sustainable Development Goals set out to achieve a better, more sustainable future for all. The 17 Goals are designed to address the challenges we face, including those related to the climate emergency, poverty, and inequality.
By aligning themselves to these goals Impact investments offer significant long-term return growth potential. Could we say the same of more traditional sectors such as tobacco and energy which have been so popular for investors over the last decades? These sectors which would not be part of a positive impact portfolio are currently facing large sustainability risks. Tobacco manufacturers, for example, have seen their share price falling over 25% over the last 3 years due to a decreasing demand for its products. Large oil companies have also faced a challenging environment over the last few years due to a falling oil price.
A positive impact approach focuses on the faster growing part of the markets and as such can offer attractive diversification benefits to a more traditionally managed portfolio. It also does not necessarily mean taking more risks. An already significant and fast growing universe of investment opportunities allows investment managers to build portfolios suitable for all risk profiles. Investors are also more comfortable investing in better-run companies, as it helps reduce the risks of potential scandals and significant losses.
Do investors have to sacrifice returns in order to follow their values!?
The track record of impactful investments so far shows that they have the ability to outperform conventional equivalents and that their innovative business models are highly profitable. A benchmark study published by Cambridge Associates found that impact investing can capitalise on long-term social or environmental trends to compete with, and at times outperform, traditional asset class strategies.
Indeed, the positive impact approach itself favours companies that are trying to do good and run their businesses in a sustainable manner. Such companies avoid fines and other penalties; they have stronger relationships with their customers, suppliers and employees. Furthermore, they tend to operate in emerging sectors with high-growth potential.
What Impact could you make?
To see what impact your portfolio could generate follow the link below to the Positive Impact Calculator
provided by EQ Investors:
Be The Change You Want To See In The World!
In recent years, more and more people are looking for their money to ‘do good while doing well’.
Impact investments are widely available across most platforms and can usually be held in ISA, Pension, investment bond and General Investment Accounts.
Today there is a real opportunity to 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.
If you are interested in finding out what your money is actually invested in then why not let us do an X- ray of your existing investments to see how closely your portfolio aligns to the UN Sustainable Development Goals.
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