Impact investing targets a very clear social or environmental outcome that is measurable and transparent. Instead of just refraining from investing in something that doesn’t align with your beliefs, you’re focusing on companies that are operating responsibly and having a positive impact on the world.
How much of an increase have you seen in sustainable investment assets globally?
We have seen sustainable assets increase by 61 percent in the last few years and the growth continues globally. About two thirds of the sustainable investment market is in Europe and 30 percent in the U.S., where we are seeing faster growth. We know that exclusionary screening is most prevalent in Europe, whereas the ESG approach is most common in the U.S.. In my opinion, a key reason why growth isn’t even greater is because there hasn’t been a wide range of investment opportunities to meet the demand until very recently.
If you could pinpoint the source of this increased demand, what would it be?
No matter how old you are or which generation you identify with, there is an increasingly undeniable overlap between our personal lives, our financial lives and the world at large. Whether it’s carrying reusable bags with you to the grocery store or hearing the Pope talk about climate change or reading about President Obama’s environmental initiatives, it’s clear that what we do today has long term impact. There’s now an opportunity for people to direct their investment capital in a way that is meaningful to them beyond just generating a financial return. This opportunity is resonating with individual investors who are looking to do more with their money. At BlackRock, our job is to try to protect and grow our clients’ assets, and our investment platform, insights and technology drive our ability to identify and track attractive impact opportunities. Our objective with any impact investment is to deliver two outcomes: (1) defined and measurable impact outcome alongside (2) a targeted financial return.
How can an investor be certain that they are making a difference and having a positive impact overall?
Transparency is very important. With the reporting capabilities that are being made more readily available through technology, it is becoming easier to effectively measure the repercussions of where we as investors direct our money. For example, my colleagues and I are laser focused not on what makes a “good” company or a “bad” company but which companies have a carbon footprint that is better than the index, or companies that are achieving environmental outcomes through green technology and innovation. By making this information readily available to the investor, we are helping them to decide for themselves which investments will have the impact that they are hoping to achieve.
Ann Hynek is the Global Editor of The Blog, writing about investing from a millennial perspective.