With impact investing, you can earn money responsibly and purposefully: by choosing companies and projects with a positive environmental and social impact.
Making money is every investor's goal. To do so, however, it is not necessary to compromise on ethical grounds. On the contrary, one can achieve one's objectives while doing good for oneself, the environment and others. Responsible finance makes it possible to avoid funding projects or companies whose activities may pose a threat, for example, to the conservation of a natural habitat or to workers' rights.
But there is a way to do more: not merely avoiding what is harmful, but actively aiming to support what is beneficial. It is called "impact investing" and it consists of choosing one's investments based on their positive impact from a social and ecological point of view. "It is still a niche sector, but one that is experiencing a genuine boom," explained the research centre of the French daily Novethic, which published a study on 19 July last with the aim of measuring the value of the segment.
"Responsible investments are evolving rapidly," commented Dominique Blanc, who coordinated the analysis. "We are in a transitional phase in which the impact investing approach, which aims to reward companies that are able to demonstrate the positive impact of their activities, is in full development." The report estimates the value of this type of investment at 250 billion dollars a year, worldwide: this represents only a small share of total investments considered responsible, but "between 2014 and 2016 alone, impressive growth of 146 per cent was recorded — in particular thanks to the development of Green bonds and Social bonds (so-called 'green' or 'social' bonds, ed.)."
According to the authors, two events have allowed the financial segment to advance so rapidly: "The first," the report explains, "is the adoption, in September 2015, of the United Nations Sustainable Development Goals. A decision taken by 193 UN member states: this has allowed companies and investors to rely on clear benchmarks regarding the social and environmental impacts of their transactions. The second is the launch, carried out last January in Paris, of the Principles for Positive Impact Finance, promoted by the United Nations Environment Programme, Unep. Already today, around twenty banks and financial institutions have signed up."
In geographical terms, for now the majority of impact investing transactions are concentrated in Sweden and the Netherlands. Novethic cites in its study the examples of the two largest Dutch pension funds, Abp and Pfzw, which have committed to investing in sustainable development projects 58 and 20 billion euros respectively by 2020.
But how can one distinguish "positive-impact investments" from those that are, perhaps, only so on the surface? The methodological question remains open and, inevitably, various criteria may be taken into consideration. The Novethic report nonetheless cites some of them, regarded in some way as "safe" for identifying virtuous businesses: among others, a reduction in waste produced, water savings generated, a decrease in CO2 emissions, and the quantity of energy produced from renewable sources.
"For impact investing to be credible," stressed Harald Condé Piquer, the study's author, "the objectives need to be clear." Unfortunately this is not always the case, "even when investments are presented on paper as sustainable." The advice for anyone wishing to invest responsibly and purposefully is therefore to get informed, stay vigilant, and read. In order to make conscious choices.
