In an ultra-connected world where transparency is the norm, investors have begun to appreciate that compartmentalizing their values and investment decisions is no longer practical. As such, recent years have seen unprecedented interest and activity across the environmental, social and governance (ESG) & impact investing spectrum, with many investors facing greater pressure to align their investments with their values. The focus on ESG & impact investing should only intensify as views continue to evolve and the influence of the millennial generation increases.
Beginning in the 1700s, when faith-based investing became a common practice in communities such as the Quakers, ESG & impact investing has undergone continuous evolution.
Over the past years, ESG & impact investing represents a major shift in the general philosophy of investors driven by a multitude of factors ranging from changing investor priorities to increased incorporation of ESG factors to manage risk—a shift that we expect to continue to develop in the upcoming years.
The spectrum of ESG & impact investing is broad–with ESG investing focused on incorporating ESG values into traditional frameworks and impact investing actively targeting investments aimed at solving social and environmental issues. Investors need to select the approach most suitable to meeting their goals.
Some examples of key investable opportunities across the ESG & impact investing landscape
With a broad, rapidly changing landscape of ESG & impact investing strategies, tools and approaches, it is important to work with experienced advisors and investment managers to pursue an investment approach grounded in thoughtful portfolio construction, manager selection and portfolio management, supported by the appropriate breadth and depth of resources to the central tasks, as opposed to focusing on more conceptual or abstract aspects of ESG & impact investing.