It is the question that has long troubled investors: can you do good and achieve good returns at the same time?
As a growing body of evidence points to the fact that sustainable funds can outperform their peers, impact investing is seeing an unprecedented boom. Investors around the world are unleashing the power of capital to have a positive impact on the world.
The UK investment market is no exception. Estimated to be worth some £15 billion in 2016, Triodos Bank’s latest Annual Impact Investing survey suggests that we are on the cusp of accelerated growth over the next decade. With a forecast of 173% growth, our analysis – in partnership with research firm Development Economics – predicts that the market is set to be worth a huge £48bn by 2027.
These are some impressive figures, but what’s behind this acceleration?
Drivers of growth
The research points to both appetite for more ethical investment opportunities among existing investors, and the rise of a new generation of socially conscious millennial investors. A fifth of UK investors are planning to invest in a socially responsible investment (SRI) fund in the coming years, rising to 47% amongst younger investors aged 18-34.
Though demand among investors is high, it appears that the sector needs to catch up. More than half of investors would like their money to support companies that contribute to making a more positive society and sustainable environment. But 73% of UK investors have never been offered ethical investment opportunities and 61% would not know where to go for more information on SRI.
Investors also crave more knowledge of what they are investing in and how their money is being used. Female investors in particular are looking for more transparency when investing, with three-quarters (74%) of women surveyed citing this as a key requirement. This is where Triodos Bank delivers, thanks to complete transparency about the organisations within the SRI Funds offered to UK investors.
The rise of ‘resist’ investing
The research also points to a new trend of ‘resist investing’, particularly among younger investors. A third of investors are motivated to invest in an ethical fund because of negative events in the news, rising to 56% of investors aged 18-34. This age group cites climate change-related disasters; the 2008 financial crisis; and the fossil fuel divestment movement as their biggest stimuli.
While the increasing popularity of impact investing is welcome news, it has also sparked debate regarding the rise of ‘impact-washing’ – or as the Global Impact Investing Network defined it, ‘the concern that misuse and dilution of the term impact investing will render it nearly meaningless’.
Indeed, according to our research, 45% of investors are worried that some investment funds labelled as SRI are in fact still investing in companies which have a negative impact on society or the environment. Over a third (39%) think SRI funds need to have a tighter criteria.
Bevis Watts, managing director of Triodos Bank UK, said: “Demographic changes, social media and awareness of the challenges facing our planet mean that investors are waking up to the fact that there really is no such thing as a neutral investment. Every investment has an impact on individuals, society and the economy.”
“The Socially Responsible Investing (SRI) market is growing quickly but we must be careful that it isn’t just labelled as sustainable investment on the surface. Otherwise it might come down to just doing things slightly less badly. A best-in-class investment in the tobacco or arms sector is not going to help make our society more sustainable. We encourage all investors to seek out funds that are not only best-in-class, but that apply strict sustainability criteria.”
“There is a real opportunity for investors to seize the power of money for positive change. Now is the time for the sector to step up to the plate and ensure that these opportunities are genuine, measurable and thoughtful.”
“I started investing with Triodos Bank because I wanted to see my money supporting causes and companies that I believe in. I was also keen to actively avoid investing in companies I disagreed with or ones that have a negative social or environmental impact.
Investing with Triodos made sense to me because I get a good return on my investment and my money is having a positive impact and reflecting values”
With SRI funds, capital is at risk and the value of an investment can fall as well as rise, income is variable and not guaranteed, and individuals may get back less than invested.
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