The global COVID-19 crisis, social unrest, and economic inequality have highlighted how connected we all are and how deeply we need more efficient systems.
This is where impact investing — also known as SRI (socially responsible investing), ESG (environmental, social, governance), sustainable investing, or socially screened investing — comes in. While impact investing is not new, investors are now starting to fully understand its significance. Investors want to make a difference in the world with the capital they are investing.
Impact Investing By the Numbers
Supporting a sustainable future is not only good for the world — it’s good for your wallet. There’s a common perception that by investing in sustainable companies, you pay a price for more “moral” investments — but data suggests that sustainable investments are actually financially rewarding. Here are a few key stats:
- The COVID-19 pandemic crashed the market, yet sustainable investments performed better than their counterparts during the first quarter of 2020. According to BlackRock, investment funds tracking the performance of companies with better ratings on ESG issues lost less money than those including worse performers in 94 percent of cases during the COVID-19 crisis.
- Last year, shares of the 100 companies on Barron’s “America’s Most Sustainable Companies” list had average returns of 34.3 percent, while the S&P 500 had 31.5 percent.
- 2019 saw a total of 479 green bonds issued worldwide, up by a quarter compared to the previous year. 2020 is set to be a “bumper” year for green bonds.
- According to Global Impact Investing Network (GIIN)’s 2020 Annual Impact Investor Survey, the global impact investing market is estimated at $715 billion.
- For the past one-, three-, and five-year periods, ESG stock and allocation fund strategies lost less money than non-ESG funds during market declines and displayed less volatility, Morningstar reports.
- According to a Nuveen study of high-net-worth investors and financial advisors, 54 percent said they would invest their entire retirement balance into a responsible investment portfolio.
But the push for impact investing is not just about potential returns: As The Business Times notes, people worldwide want companies to reduce their impact and are becoming more aware of the role that financial institutions play when it comes to creating a sustainable future.
For instance, the movements Fridays for Future and Extinction Rebellion demand action from political and business leaders. And as Barron’s writes, “How a company treats essential workers has become a measure of how responsible it is. … Then came the deaths of Ahmaud Arbery, Breonna Taylor, and George Floyd, and the widespread protests about police brutality and inequitable treatment of people of color. Top-level executives, who once took a hands-off approach to such issues, began speaking out.”
Employees also want to work for businesses that put sustainability as one of its core values. As we’re seeing, impact investing is not just a fad — it’s an investment strategy that is here to stay for the long-term.
Interested in Impact Investing? Reach Out to The Humphreys Group Team Today
The Humphreys Group supports the increased interest in investing to promote social good. It’s one of the most effective ways we can vote with our dollars. Many of our clients are invested in ESG funds, such as the Pax Ellevate Global Women’s Leadership Fund, the Pax Global Environmental Markets Fund, Dimensional Fund Advisors’ Social Investment Funds, and Dimensional Fund Advisors’ Sustainability Funds. If you’re interested in learning more about impact investing, reach out to our team today for additional fact sheets and materials.
