Impact Investing: A Virtuous Cycle?

Sustainable investing has evolved to include a variety of approaches to selecting investments.  The approaches range from the original “exclusionary screening” to shareholder activism, to Impact Investing.  As the name suggests, the idea behind Impact Investing is to select securities with the intention of creating (and measuring) social and environmental benefits, in addition to earning a financial return.

Some common themes of Impact Investing are energy and land conservation, community and economic development, and good corporate governance. And though still a relatively small segment of the sustainable landscape, asset flows into these strategies can help increase opportunities for new ones moving forward as well. 

So how does this Virtuous Cycle work?  As investors continue to favor Impact strategies, money managers may take note of the trend and begin offering additional options. Money managers pool the resources of individual investors, creating momentum for new opportunities by approaching potential developers. Developers, in turn, may be more willing to consider the projects if they know that funds are readily available. As the strategy grows, more investors may become aware of it, bringing more capital to the table, repeating the cycle.

This isn’t to say that the process is easy, fast, or guaranteed to be successful. However, some of the strategies mentioned above have started to gain more traction and may offer more opportunities for investors searching for sustainable investing strategies.

IMPORTANT DISCLOSURES

The economic forecasts set forth in the presentation may not develop as predicted.  Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.  Indices are un-managed and cannot be invested into directly. Un-managed index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. Past performance is no guarantee of future results.

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