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Market Decode: Is Impact Investing Right for You?

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


THE IDEA OF 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, impact investing can be thought of as investing in companies, organizations, and funds with the intention of generating social and environmental impact alongside a financial return.

As of 2017, more than 1,000 investment funds had incorporated environmental, social and governance (ESG) factors into their investment process, up from just 55 funds in 1995.1 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 performance and practices. In 2017, that number had jumped to 85%.2

What's more, a June 2018 report from Merrill Lynch entitled "Impact Investing: The Performance Realities" suggests that investors don’t have to sacrifice long-term growth when investing for impact. “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, investment strategist and co-chair of the Impact Investing Council at Bank of America Global Wealth and Investment Management, 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."

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