Socially Responsible Investment Strategies
In the past decade, more and more investment funds have been created with goals that go beyond strictly financial returns. Impact investing, also called sustainable, socially responsible or ESG (environmental, social, and governance) investing — has gone mainstream, as investors concerned about social and environmental health seek to put their money into companies that share their values. But while these investors may wish to effect meaningful change through investing, they still want to see healthy financial returns.
One enduring question is whether investors can pursue socially responsible investing without sacrificing their portfolio’s performance. While there continues to be much debate, and the jury is still out on how a bear market affects impact funds - many studies have claimed that it’s possible for investors to do both.
This article takes a deep dive into the topic of impact investing, including the effects of market volatility, “greenwashing”, proposed SEC rules for ESG disclosures and evolving market reactions. It concludes with questions to consider for those contemplating adding impact investing to their portfolio.
Why It Matters
- Investment funds focused on the energy transition, low-carbon or carbon-capture opportunities or other “socially responsible” investment strategies create opportunities to raise capital and attract investors.
- Recently, there has been backlash against ESG investing philosophies and the influence large passively-managed funds hold on the market.
- Funds and companies considering environmental, social, and governance commitments need to understand the nuanced challenges they may face.