A new study by
Traditional investors have been hesitant to hop on the impact investing bandwagon, concerned that it comes with side effects -- slow returns, minimal returns, and high risk.
Yet, this new report, which surveys over 10,000 equity mutual funds (over the last 7 years) makes the argument that sustainable investing funds have actually met or exceeded the median returns of traditional equity funds. They define sustainable investments as those which offer “competitive financial returns and also create a positive social/environmental impact.”
Moreover, these funds had lower volatility. In fact, 72 percent of the companies surveyed with a sustainability mindset offered higher profitability.
Sustainable investment has been on the rise. According to Morgan Stanley, $1 out of $9 in 2012 could be qualified as sustainable investments. In 2014, that ratio closed in to $1 out of $6, amounting to nearly $6.57 trillion in investments.
Last month, another report by Morgan Stanley identified that Millennials and women were very keen on sustainable investing. Millennials, it said, were twice as likely to invest in companies or funds that have social and environmental outcomes. The reverse was true too -- if companies have questionable operating procedures or produce harm, Millennials are more likely to divest.
More than three-quarters of the women surveyed, expressed interest in impact investments, more so than men who hovered near 60 percent. Women were keen to balance the rate of return with the impact of their investment -- it’s not an either-or choice.
“The trajectory for sustainable investing continues to point upward. What used to be a bifurcated decision – one between investing to make money and giving to do good – is increasingly becoming a blended conversation as investors look to harness the power of the capital markets as a force for positive impact,” said Audrey Choi, Managing Director and CEO of the Institute for Sustainable Investing at Morgan Stanley.
While this is all good news, there still remain obstacles. The survey revealed that investors still believe there is a trade-off -- even if it’s merely a perception.
“Sustainable investing presents the opportunity for individuals and institutions to align their investments with their values, but there are clearly many investors who have reservations over whether sustainable investing will require them to sacrifice investment performance,” said Choi.
The proof is in the data.
