06/11/2019

Prosperity and Responsibility – The New Age of Investing

Today’s investors are looking for more than just profit—responsibility and impact have become increasingly important considerations when making investment decisions. Green bonds are already commonplace, and have more recently been joined by social impact bonds.

The trailblazers in responsible investing have been the most demanding clients, such as institutional investors and family offices. For them, responsibility is a necessity, but it has also begun to catch the attention of the wider public. Younger generations—millennials and Generation Z—have a very different worldview and consumer habits than today’s middle-aged generations, and expect companies to have a positive impact on society.

Corporate impact reporting and supplementing financial figures with new performance indicators are also rising trends. Corporate responsibility reports provide a general picture, but comparing responsibility and impact between companies remains difficult. Measuring impact and communicating it to investors will require innovative solutions. Companies seeking investors need to create incentives that promote sustainable development and positive social impact. The best incentive is likely to be including impact in the valuation of companies in addition to financial performance.

The EU has included responsibility in its action plan, which ties financing to sustainability. With skilfully drafted conditions, it is already possible to incorporate impact into investments.

Responsible and impact investing is no longer a marginal phenomenon, but the new normal in investing.