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Market Decode: Is Impact Investing Right for You?

Discover how you can combine a desire to have a positive impact on the world with investing for your future

THE IDEA OF SUSTAINABLE AND IMPACT INVESTING has been around for several decades, but it used to mainly involve “negative screening,” or avoiding investing in companies and industries whose products or practices do not meet investor standards. It has changed a lot since then: Today, sustainable and impact investing can be thought of as investments that seek positive social and environmental effects while targeting competitive financial returns. There’s now a wide range of investment options to choose from to fit your interests and needs.

As of 2019, there were more than 300 sustainable funds that intentionally integrate sustainability data into their investment process and an additional 564 investment solutions that take environmental, social and governance (ESG) data into consideration.1 And more and more companies are responding to growing investor interest. As the graphic below shows, in 2011, only 20% of companies in the S&P 500 published annual reports on their ESG data and practices. In 2019, that number had jumped to 90%.2

Bar chart graphic showing growth of ESG reporting by S and P 500 companies between the years 2011 and 2019. For 2011, it shows that 80 percent of companies were non-reporters and 20 percent were reporters, for 2012 it shows that 47 percent were non-reporters and 53 percent were reporters, for 2013 it shows that 28 percent were non-reporters and 72 percent were reporters, for 2014 it shows that 25 percent were non-reporters and 75 percent were reporters, for 2015 it shows that 19 percent were non-reporters and 81 percent were reporters, for 2016 it shows that 18 percent were non-reporters and 82 percent were reporters, for 2017 it shows that 15 percent were non-reporters and 85 percent were reporters, for 2018 it shows that 14 percent were non-reporters and 86 percent were reporters, for 2019 it shows that 10 percent were non-reporters and 90 percent were reporters. The source is the Governance and Accountability Institute, Inc., 2019

What’s more, research suggests that investors don’t have to sacrifice long-term growth when investing for impact. BofA Global Research found that a strategy of buying stocks that rank well on ESG metrics would have outperformed the broader market by up to 3 percentage points per year over the last five years.3 “There is growing data showing that impact investing may potentially produce long-term returns that are as good as, or even better than, traditional investing,” says Jackie VanderBrug, head of Sustainable and Impact Investment Strategy in the Chief Investment Office for Merrill and Bank of America Private Bank, in the above video.

“It just makes sense,” she adds. “Companies that are driving efficiency in water, waste and energy can help lower their costs, and better workplace policies may lead to more employee engagement and stronger revenues over the long term.”

Visit our sustainable and impact investing page for more insights into our approach to investing for impact, and then speak with your advisor about how you can get started.


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