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INSIGHT: The Growing Call for New, More Sustainable Investing

Jan. 23, 2020, 9:00 AM

In December, thousands of world leaders gathered in Madrid to address what is arguably the most pressing issue of our time: the climate emergency. We are, as the United Nations secretary general said, nearing “the point of no return.”

Heads of state, business leaders, scientists, and activists at the COP25 conference urged drastic changes to our behavior on a global and a personal scale. For the world’s biggest economies, that means major reductions in greenhouse gas emissions. For individuals, it may mean everything from flying less to buying less.

Unquestionably, this is an epic uphill battle.

Public support for political action is growing. But now, we have strong evidence for another realm in which most of us are eager for meaningful change, as well: Huge numbers of regular people are demanding a more sustainable approach to the way we invest our money.

In a landmark, nationally representative survey with more than 6,000 respondents, the U.K.'s Department for International Development discovered that 68% of U.K. savers would opt for more sustainable investments if given the choice. That’s more than two out of every three seeking better alignment between their investments and their values.

But the survey goes further—upending many assumptions about sustainable investing. Once and for all, the survey proves: It’s not just for the very rich; it’s not only for millennials; and it’s not a blank check. At the Global Impact Investing Network, we see these findings as hugely positive for impact investing—which is investing that allocates capital for both financial return and social and environmental benefit.

To tackle the biggest issues of our time, including the climate crisis and the world’s vast inequality, we need everyone on board with fundamental change in the way we invest.

It’s Not Just for the Very Rich

For years, a lingering myth has claimed that values-aligned investing is reserved only for the very wealthy. In fact, high net worth individuals do express extremely high levels of interest in sustainable investments. But those who perpetuate the exclusionary falsehood seem to believe that only the rich are able or inclined to make such investments.

In truth, interest is not limited to the wealthy alone. The survey shows that interest in sustainable investments is highest among those with investable assets over £25,000 ($32,500)—a much broader segment of households than many assume. Among the slice of survey respondents who said they are interested in putting money to work in sustainable investments right now, 51% earn between £30,000 and £99,999 ($39,000 - $128,000) in annual income.

This broad swath of incomes positions many regular wage-earners alongside the more affluent in their demand for sustainable and impactful investment options. Investing for a better future is attractive across the income spectrum.

It’s Not Only for Millennials

Another mistaken assumption is that investing for a more sustainable, inclusive world appeals only to the young. DFID’s research confirms that interest is especially high among millennials, defined in this survey as those between the ages of 18 and 39. Fully 74% of that cohort would choose sustainable investments if they could.

But stopping with that simple conclusion ignores the bigger reality. If we return to that slice of respondents who told interviewers that they would be interested in putting money to work in sustainable investments immediately, 41% are over the age of 40. No marketer would ignore the demands of more than 40% of their market. Investing for a better future is not only the responsibility of younger people!

It’s Not a Blank Check

The survey forcefully dispels a third pervasive myth: the myth that investing sustainably means writing a ‘blank check’ with only concessionary returns and fuzzy accounts of impact to show for it. The GIIN’s 2019 Annual Investor Survey upends the first part of that assumption by confirming that two out of every three impact investors actually target market-rate returns.

Now, DFID’s survey dispels the second part by demonstrating that values-aligned investing can never be successful without credible impact performance measurement, as well. More than 60% of people said they would be more likely to make a sustainable investment if they had evidence of its impact on people or the planet.

Survey respondents were emphatic that trust matters: “The research finds that people in the UK want to be clear about how an investment will impact the world—how it will avoid harm or contribute positively to solutions to global challenges,” the survey authors wrote. And 44% said that a barrier to making a sustainable investment was that they do not trust financial institutions to achieve the positive impacts they claim.

At the GIIN, we believe that rigorous impact performance measurement is the best way to bridge this ‘trust gap.’ When people are armed with credible, comparable impact performance data, they can make investments with confidence that their money is building the future they want.

Listen to the People

The broad range of “regular folks” interested in aligning their investments with their values is clear evidence of a growing social mandate for a new way of investing—and clear evidence of a burgeoning call for fundamental change in our financial system. But right now, we only have such deep insight for a single place.

The GIIN strongly encourages similar surveys about impact investing for other parts of the world. Imagine the market signal we would send if we had evidence of impact investing demand for every country in the G-7! Even better—what if we had it for every country in the G-20? Or for all 36 members of the Organization for Economic Cooperation and Development? Or all 21 countries in the Asia-Pacific Economic Cooperation forum? Best of all—imagine if we had this data for all 193 UN member states!

Ultimately, though, evidence of broad interest is not enough. What matters is converting that interest into actual investment and actual impact. With clear illustrations of demand, markets should respond with products that make it easier for regular people to access sustainable investments.

Imagine what our future might look like if we harnessed the investment power of ordinary people eager to put their money to work in alignment with their values.

The untapped potential now being expressed is tremendous. The world’s problems are too pressing to miss this critical opportunity.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Amit Bouri is the chief executive officer and co-founder of the GIIN, where he leads the largest global community of impact investors dedicated to increasing the scale and effectiveness of impact investing.