To what extent does Google live up to its company motto “Don’t be evil”? How well does Amazon treat its employees? Should Starbucks stop the sale of single-use coffee cups? These are all questions investors have begun to ask themselves in recent years. In fact, the impact that companies have on society and the environment has become a major factor in the investment decisions many are making.
Increasingly investors are seeking out companies that make a positive impact on society. And there are an ever-growing number of funds that specifically target ‘positive’ sectors by investing in companies providing environmental, healthcare, technology, or societal solutions. Many also aim to use shareholder engagement to improve corporate behaviour. So strong has this cultural shift been that last year research published by Triodos, the sustainable bank, found nearly two thirds of UK citizens would prefer their investments supported companies that were not only profitable but also made a positive impact on society and the environment.
The independent research organisation Ethical Investment Research Services (EIRS) estimates that since 2007 the green and ethical retail fund market has grown from a modest £8.9 billion to £1.5 trillion last year. And there are plenty of funds outperforming the wider market average by some considerable margin. And while institutional investors were the early adopters in this field, individual investors are a growing in number and their involvement is only set to accelerate.
No longer is it enough for many investors that the investment schemes they commit to simply avoid social damage. They want a fair market return for supporting companies that make a positive impact. The shift to impact investment will increasingly be seen as standard and as essential as any other investment product in years to come.
Julian Pickstone is Head of Social Impact at Triple Point, which has over £1.4bn AUM.
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