Headlines about the numerous environmental and social challenges that are threatening the planet often make for scary reading.
Climate change, an ageing population and food sustainability are just a few of the global issues that urgently need tackling, with big brands and smaller companies increasingly waking up to these problems and the different ways they can address them.
Investors often want to ‘do good’ in the world too, but at the same time don’t want to sacrifice returns. That’s why growing numbers are turning to impact investing which aims to protect and grow wealth, whilst supporting the environmental and social causes that are important.
Doing well by doing good
Our research found that two thirds of investors find the idea of impact investing appealing 1.
It’s not hard to see why, with this approach seeking to provide investors with the best of both worlds - considering the impact on society and the environment as part of the investment process, without compromising on long-term returns.
When investing for impact, companies are assessed both in terms of how they operate and the goods and services they provide. Their impact can be wide-ranging; from reducing plastic waste, increasing clean energy production, to improving healthcare, or the efficiency and safety of public transportation.
Whilst impact investments may have an additional aim, it’s important to keep in mind that this doesn’t necessarily have to come at a cost. Impact investments often focus on companies that are well placed to benefit from long-term trends, such as the move towards renewable energy.
In fact, academic and industry research shows that companies which put impact at the heart of their business may have an edge which can reap rewards for investors. One of the foremost studies2 paired companies with similar characteristics but one key difference – whether they had embedded sustainability into their business model and operating practices.
When compared over an 18-year period, companies which embraced sustainable practices significantly outperformed those that didn’t, both in share price and accounting terms. The overall conclusion of the study was that sustainability can be a source of long-term competitive advantage.
How can I make impact investments?
If you want your investments to make a positive contribution to the world, you have options both in the types of funds available, and their investment strategies.
Some fund managers consider environmental, social and governance factors when deciding where to invest, or they’ll look more broadly at social and/or environmental trends for investment opportunities. Others identify a specific societal or environmental challenge and look for investments that address it.
For example, the Aberdeen Responsible UK Equity Fund invests in companies such as Unilever Plc, which has implemented a responsible sourcing policy and forest sustainability initiatives.
The Stewart Investors Worldwide Sustainability Fund also invests in Unilever, along with other companies such as Cerner, which uses technology to encourage communities and people to engage with their own health, for example by tracking their progress through mobile and virtual services.
Other ways to make an impact
If you don’t want to find and mix individual funds to build your portfolio, or you’d rather not restrict yourself to just one or two funds, you may want to consider the Barclays Multi-Impact Growth Fund.
This is a multi-manager fund, which means it invests in a range of funds managed by different managers to help provide diversification.
The Barclays Multi-Impact Growth Fund invests primarily in specialist third-party funds which have been chosen both for their potential for strong financial returns and their impact on key social and environmental issues positive contribution to society.
Many of the underlying funds in this fund, focus on tackling some of the biggest social and environmental challenges of our time. This includes the Allianz Global Sustainability Fund, which has holdings in Xylem, a U.S. water infrastructure manufacturer, producing efficient pumps and advanced water meters. In West Virginia alone, 6,500 water meters have been installed, helping customers to reduce their combined excess water consumption by an average of 25 million gallons per year.
Another underlying fund is the RobecoSAM Sustainable Healthy Living Fund. This invests in companies such as Thermo Fisher Scientific, which is a vital supplier to biopharmaceutical companies, hospitals, clinical and research labs.
Find out more about Barclays Multi-Impact Growth fund
Find out more about impact investing
Please be reminded that this article serves to illustrate how it is possible to invest in line with this theme. Our using the funds and companies as examples, is not a personal recommendation to invest in these, or any other investment. If you’re unsure where to invest, seek professional financial advice.