Research Article: Investment

Sustainable Investing

By: The Havard Business Review

Investing in sustainability has usually met, and often

exceeded, the performance of comparable traditional investments.

Sustainable investing has experienced a compound annual growth rate of 107.4%, increasing AUM from US$1.0t in 2012 to US$4.3t in 2014, according to The Forum for Sustainable and Responsible Investment’s 2014 report.  Additionally, the number of available sustainable investing funds has nearly tripled since 2008.


This staggering market growth is being driven by not only millennials, but also evolving macro-economic trends.  With an estimated addition of 2 billion people by 2050, global demand for food, water and energy will drive the need for innovative improvements in infrastructure to address the resource demand associated with a growing population.
 

Clean water and sanitation, innovations in energy generation and distribution, improved health care, and more efficient transportation provide an abundance of opportunity for sustainable investment growth.


As these investments continue to display a track record of market outperformance, investors of all types will demand that their wealth and asset managers provide products that not only outperform, but also align with their values.  A recent study by Morgan Stanley, which evaluated more than 10,000 funds and managed accounts, shows that “Investing in sustainability has usually met, and often exceeded, the performance of comparable traditional investments.”


PRINCIPLE ONE: Definition
Positive Impact Finance is that which serves to finance Positive Impact Business.  It is that which serves to deliver a positive contribution to one or more of the three pillars of sustainable development (economic, environmental and social), once any potential negative impacts to any of the pillars have been duly identified and mitigated.  By virtue of this holistic appraisal of sustainability issues, Positive Impact Finance constitutes a direct response to the challenge of financing the Sustainable Development Goals (SDGs).


PRINCIPLE TWO: Frameworks
To promote the delivery of Positive Impact Finance, entities (financial or non financial) need adequate processes, methodologies, and tools, to identify and monitor the positive impact of the activities, projects, programmes, and/or entities to be financed or invested in.


PRINCIPLE THREE: Transparency
Entities (financial or non financial) providing Positive Impact Finance should provide transparency and disclosure on:

  • The activities, projects, programs, and/or entities financed considered Positive Impact, the intended positive impacts thereof (as per Principle 1)

  • The processes they have in place to determine eligibility, and to monitor and to verify impacts (as per Principle 2)

  • The impacts achieved by the activities, projects, programs, and/or entities financed (as per Principle 4).


PRINCIPLE FOUR: Assessment
The assessment of Positive Impact Finance delivered by entities (financial or non financial), should be based on the actual impacts achieved.