Sustainable and Impact Investing: A New Era for Financial Returns

Sustainable and impact investing is on the rise, and for good reason. According to a study, 85% of institutional investors now consider environmental, social, and governance (ESG) factors in their investment decisions.

This shift is driven by a growing recognition that financial returns and social responsibility are not mutually exclusive. In fact, research has shown that ESG-focused portfolios can outperform traditional ones over the long term.

The benefits of sustainable investing go beyond just financial returns, however. By investing in companies that prioritize social and environmental responsibility, investors can also contribute to positive social and environmental outcomes.

As one example, a study found that companies with strong ESG practices tend to have higher employee engagement and better customer satisfaction rates.

Sustainable investing is an approach that considers the environmental, social, and governance (ESG) factors of a company when making investment decisions. This approach can help investors achieve long-term financial returns while also contributing to positive social and environmental outcomes.

Investors can use ESG criteria to screen out companies that have poor environmental or social records. For example, a company that has a history of pollution or human rights abuses may be excluded from a sustainable investment portfolio.

Sustainable investing is not just about avoiding harm, but also about seeking out companies that are leaders in ESG practices. A company that has implemented renewable energy sources and has a strong track record of diversity and inclusion may be a good candidate for a sustainable investment.

According to a study, 75% of investors believe that ESG factors are important in their investment decisions. This suggests that sustainable investing is becoming increasingly mainstream.

Investors can also use ESG criteria to engage with companies and encourage them to improve their practices. For example, a shareholder can vote to support a resolution that requires a company to disclose its carbon footprint.

By considering ESG factors, investors can potentially reduce their exposure to risks associated with environmental degradation, social unrest, and regulatory changes.

We offer four ways to engage within the sustainable investing framework: ESG Integrated Portfolios, Exclusionary Screening, Thematic Investing, and Impact Investing. Each approach has its own unique benefits and goals.

ESG Integrated Portfolios are diversified across asset classes and focused on investments and funds with high ESG ratings and proactive ESG strategies. They are designed for clients interested in pursuing a proactive ESG strategy while also achieving investment returns consistent with standard benchmarks.

Exclusionary Screening allows investors to eliminate certain investments from consideration in their portfolios, such as companies that may be negatively impacting the environment or society. Investors can utilize these negative screens to avoid businesses involved in activities such as fossil fuels, tobacco, alcohol, firearms, and gambling.

Thematic Investing enables investors to proactively support specific issues that are important to them while also generating investment returns. Investors seeking to make a positive change on a particular issue can choose thematic investing to create a strategy highlighting issues such as energy efficiency, clean water, or improving access to healthcare, educational opportunities, or housing.

Impact Investing seeks to ensure that investment capital is not only aligned with the investor's values but is also producing tangible positive environmental or social impact. Examples of impact investments can include micro-financing to minority-owned small businesses or owning social impact bonds, where the return on investment will vary based on the achievement of an agreed-upon and measurable outcome.

The MSCI Sustainable Impact Metrics framework is comprised of six Environmental Impact categories and seven Social Impact categories. This framework allows investors to measure their exposure to listed companies providing sustainable impact solutions.

Impact investing is gearing up to create a quantifiable impact on societal and financial returns.

Data channels around climate change will lead to the creation of new thematic investment strategies.

New regulatory guidance on impact investing standards will empower investor perceptions of greenwashing and mismatch with fiduciary duty.

Investors are seeking impact investment to catalyze their climate innovation and build more resilient and inclusive companies.

Businesses are now incorporating strategies to demonstrate both positive profit and purpose.

The impact investing trend is set to rise, driving and scaling sustainable investment in 2024.

The future of investing will be reimagined, with a focus on building a sustainable world.

Investors will be looking for impact investment to create a quantifiable impact on societal and financial returns.

ESG (Environmental, Social, and Governance) factors will be positioned for greater adoption to fight the climate crisis.

Impact investing will continue to build and create a quantifiable impact on societal and financial returns.

By 2024, the impact investing trend will have scaled sustainable investment, scaling businesses on the path to a sustainable future.

Impact investing is an approach aimed at creating both financial return and positive social and environmental impact that can be actively measured.

The impact investing industry is scaling rapidly, with affording investors having a significant influence on public and private markets in 2024.

New regulations and guidance are being introduced to clarify and standardize the industry, paving the way for larger adoption in 2024 and beyond.

Measurement remains one of the hardest parts of the industry, but it's an essential aspect of impact investing.

Here are some of the key themes that will offer elevated opportunities for investors in 2024: