Vienna, February 19, 2019 - “Impact Investing? What is that?” – people, for a long time, used to ask. This is the case no longer. There is a growing awareness of impact investing and an emerging community in the UK and Europe, following the trend towards impact investing from the U.S. But who are the people and groups behind the movement?
Investors for Impact Investing
Impact investing has gained traction among a wide range of investors, including the largest financial institutions, pension funds, family offices, private wealth managers, foundations, individuals, commercial banks, and development finance institutions. More and more investors are getting on board and put their money into impact investing ventures.
According to the Global Impact Investors Network (GIIN)’s latest annual survey, there is at present $228 billion in impact investing assets - almost double of last year’s estimate. The Thomson Reuters Foundation reported that members of Toniic, a global investment club for impact investors, have noted a similar trend with their members having seen a combined $2.8 billion of impact investments, as compared to $1.65 billion in 2016.
How Did Impact Investing Develop?
Impact investing has evolved out of Socially Responsible Investment (SRI), which is a framework for selecting investments based on Environmental, Social and Governance (ESG) criteria. The difference between SRI and impact investing is that the latter is far more geared towards generating positive social and environmental impact as opposed to merely avoiding the negative impacts. But how do you generate positive impact. One guideline is the SDGs – short for UN Sustainable Development Goals – embedded in the Agenda 2030 that define the biggest challenges for humanity and have set a deadline for achieving them. These challenges include social issues such as humanitarian crisis of refugees, alleviating the impact from climate change-induced extreme weather events, reducing air pollution in cities, addressing ocean plastics, transforming our energy system to clean energy or sustainable ways of food production, to providing access to quality education and healthcare. Many investors and funds have made the 17 Global Goals their guideline for key performance indicators.
The Power of Individuals: The Example of Al Gore
A pioneer in the area of impact investing is former U.S. Vice President Al Gore. Ten years ago already, his documentary “An Inconvenient Truth”, highlighted the environmental challenges we are struggling with today. Together with the head of Asset Management at Goldman Sachs, David Blood, he founded Generation Investment Management with the aim of delivering superior investment performance by fully integrating sustainability research into the framework of traditional financial analysis.
Blackrock and UBS as Impact Leaders
Today, Blackrock, the world’s largest investment firm managing over $6 trillion of assets has also assumed a leader position when it comes to observing social and ecological responsibilities.
UBS have been active in impact investment ever since the launch of their first impact fund of funds that raised $51 million in 2015. They raised the large sum of $471 million in 2016 for an impact fund that invests in cancer research initiatives and turns them into successful business ventures. UBS has set itself the goal to invest at least $5 billion of private client assets into Sustainable Development Goal-related impact investing, together with its partner, the Rise Fund – a new $2 billion social impact fund. UBS believes collaboration with financial services firms is essential to make SDGs funding a more mainstream development in private investing.
Impact Investments Lead to Financial Success
It is a myth that a business that aims for both impact and financial returns is less profitable than other, more traditionally oriented businesses. On the contrary, academic research has long proven that what is good for the people and the environment does not harm the financial bottom line.
For example, a 2015 study by Friede, Busch, and Bassen (ESG and Financial Performance: Aggregated Evidence from more than 2,000 Empirical Studies, Journal of Sustainable Finance & Investment) found a non-negative relationship between investing along environmental, social, and governance (ESG) factors and corporate financial performance in around 90% of the more than 2,000 studies that were conducted between 1970 and 2014.
Inquiry and contact information