Investing As A Force For Positive Change

Published by Dan Curtis on

Why positive investing is picking up pace

An increasing number of people want their investments to be a force for positive change.

‘Socially responsible investing’, or ‘impact investing’, is making that easier than ever to achieve.

Impact investing holds appeal for all ages – from millennials who are concerned about the future they will grow up in, to older generations who want to leave a healthy planet for their children and grandchildren.

‘Ethical investing’ has existed since the 1980s, but has traditionally been focused on what investment funds don’t invest in, rather than what they do. Typical types of asset that fund managers may wish to avoid include guns, alcohol, or tobacco.

In recent years however, the sector has shifted its focus towards supporting businesses and organisations that are dedicated to improving society and the health of our planet.

Investors are also increasingly becoming sensitive to the supply chains of businesses they may choose to invest in, as well as how organisations treat their staff and how well they limit the environmental impact of their operations.

people are increasingly looking to invest their money in businesses that will achieve positive gains for the climate and society
Investors are increasingly seeking out businesses that will achieve positive impacts for society and the planet as well as securing a good return on investment.
Photo: PxHere

How do positive impact investments perform compared to traditional forms of investing?

In the past there has been is misconception within the investment community that investments in socially responsible businesses do not deliver the same returns as one may expect from more traditional stocks and shares. Over past decades, achieving good returns whilst achieving good things with your money was perceived as a trade off. However, there are many examples which demonstrate this line of thinking to be a fallacy . 

Take Beyond Meat as one illustration, a company which produces a vegan meat-substitute called the ‘Impossible Burger’. Following an initial public offering of $25 per share, the stock value ballooned to over $200 in the first three months of trading – an increase of 800%.

The Impossible Burger by Beyond Meat. The stock price of the vegan 'meat' producers increased by 800 percent in 3 months. Photo: Rolande PG - UnSplash
Another popular misunderstanding is that Social Impact Investing is somehow a niche or fringe phenomenon. Perhaps this was once true, but certainly no longer. BHESCo have been raising investment from the community to develop clean energy projects for nearly five years, and although we have always been successful with our share offers, the transformation of public consciousness around climate change between 2014 and 2019 has been nothing short of astonishing.

The Greta Effect - a paradigm shift in public consciousness

This change has been most profound over the last twelve months, in no small part due to the massive publicity garnered by David Attenborough’s Our Planet series, Extinction Rebellion’s protests, and Greta Thunberg’s school strikes.

The increase of public interest in climate related issues has been mirrored within the investment community, and there is now an abundance of opportunities for investors looking to channel their funds towards sustainable initiatives.

does carbon offsetting work - brighton hove energy services co-op blog
There is now an abundance of opportunities for investors looking to channel their funds into sustainable business ventures.
Photo: PxHere
According to the World Economic Forum, climate change is among many people’s top concerns. More than ever before, the public are changing their behaviours in order to reduce their impact on the planet and to be more considerate of our natural resources. The exact same logic applies with investors, where there is a growing demand for investment opportunities in businesses that are taking proactive measures to combat the most extreme scenarios of climate change.

According to a recent study from Schroders Global, three quarters of people who invest say that sustainable investments have become more important to them in the past five years. This is driving a global demand for investments that align an attractive financial return with investors’ values and ethics.

What makes an investment 'socially responsible'?

The most common way for fund managers and investors to assess the extent to which a business makes a positive contribution to society is by examining their Environmental, Social, and Governance criteria (ESG). It is also common for ratings agencies to produce scores on different companies’ behaviour, such as supply chains, employee satisfaction, and environmental impact.
As you may expect, there is much evidence to suggest that investing in companies with a sound ethical basis can be a more secure long-term strategy than some more traditional forms of investment. There are many academic studies which demonstrate that employing an ‘ethical investment strategy’ makes a portfolio more robust and can contribute to outperformance as well as lowering investment risk. This is because companies with a values-driven, responsible board are less likely to face volatility due to poor governance.
Isn't investing just for rich people?

There can often be a wrong impression amongst the public that the world of investing is only for the very wealthy. This is not true at all. There are many avenues for becoming an investor in a socially driven business from only a few hundred pounds. The minimum investment amount in BHESCo for example is only £250.

There is a tremendous variety of socially conscious investment opportunities, and it is up to individual investors to decide what they want to see their money achieve – do you want to invest in renewable energy projects for example, or in initiatives that tackle poverty or promote education?

That choice is up to the preference of each investor, but one thing is common among all investors in the modern age – it has never been easier for investors to mobilise their money for the good of society whilst making them a tidy sum in return.

Sources

How To Be A Better Investor, Marina Gerner, iNewspaper / HSBC

Global Investor Study 2018, Schroders

Global Risks Perception Survey, World Economic Forum

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