As keen readers will know, we at Good With Money have been jabbering on about sustainable investment for some years now, believing – as we do – that it is the answer to many of the world’s ills. With government’s reluctant to rock the corporate boat, climate change and world poverty are simply not going to solve themselves – we all need to roll up our sleeves and get involved.
There is currently a $2.5 trillion (£1.9 trillion) gap to fill if the world is to meet the UN’s Sustainable Development Goals (SDGs). And these goals aren’t just a nice idea: according to the UN, the elimination of poverty, the transition to clean, safe energy, the equality of women, access to clean, safe, water, healthcare and education for all – among other targets – are all essential if the world is to avoid slipping backwards in terms of peace and prosperity; or indeed survive at all in the face of global climate change.
“Climate change and world poverty are simply not going to solve themselves – we all need to roll up our sleeves and get involved”
Accessible impact investing provides a solution to this funding gap. Once an area open only to ‘sophisticated’ or ‘high net worth’ investors, the emergence of products allowing all of us to put our money EXACTLY where our morals are is crucial to getting that 80 per cent of private funding the World Bank says the SDG’s need.
Of course, £1.9 trillion is a lot of money; but £2,617 from every European would do it. If we get the US involved, that falls to £1,819 each – or £5 per day each saved over one year.
Impact investment is highly attractive for private investors as it allows us to directly fund companies and projects doing real, genuine, measurable good on the ground. This is crucial for many who have – until now – avoided investing in a system they see as ultimately corrupt.
“Impact investing appeals to millennials, who came of age during a devastating global financial crisis for which not a single major banker has been jailed”
This is especially true of millennials, most of whom came of age during a global financial crisis that wiped $4 trillion from global GDP, drove 61 million people into unemployment, poverty and hunger, and for which not a single major bank or prominent banker or trader – the architects of the disaster – has been sanctioned or jailed.
As Good as it is, though, impact investing isn’t charity. As we outline in this and our many guides and articles on ethical and sustainable money, this is sound financial planning. Since 2014, numerous studies have shown that investing for Good can potentially make investors more money than investing in companies that either actively or passively hurt people and the planet.
These include an MSCI study, which showed that between 2007 and 2015 investors could have bagged anything between 8 and 16 per cent extra by applying environmental, social and governance (ESG) filters to their portfolios. Or a report from Harvard Business school the previous year, which found that the share prices of more sustainably focused companies performed up to 4.8 per cent better than their less sustainable peers.
“The world over, savers and investors are waking up to the power they have in a system that relies on their capital to thrive”
The time for change, it seems, has finally come. The sustainable investment industry is hoovering up assets – with the Investment Association reporting that sales of ethical funds rose to £1.3 billion in 2018. This is up 250 per cent on 2015, when sales were £371 million. Over the same period total fund sales in the UK are down -124 per cent, with 2018 the first year for negative sales for more than a decade.
The world over, savers and investors are waking up to the power they have in a system that relies on their capital to thrive. Those seizing that power are reversing that flow, putting money into the hands of people and projects that have a positive impact on society, the environment and our collective future.
It is a truly exciting time.
This article is taken from the Good Guide to Impact Investing, your complete guide to everything you need to know about making a positive impact with your money: from what it is, to where to find and assess investments and how to invest in them for as little as £5. Download your FREE copy now.