Impact investing, the strategy to make financial profits but create a long-standing, positive impact on our world, in the process, is becoming increasingly ‘a thing’ in the City and other financial hubs around the world.
Many investors are hyper-aware of what is happening around them, with factors such as corporate social responsibility (CSR) making a difference when choosing to invest.
Impact investing also includes factors such as socially responsible investment (SRI) and environmental, social and governance investment (ESG).
With millennials and those that follow them changing the world one investment at a time, Maxim Manturov, head of investment research at Freedom Finance Europe,told City A.M. that the rise of impact investing puts an “ever-increasing pressure” on some of the world’s biggest companies.
“The next generation are demanding change with their investments, opting to spend their cash on projects that match their own values, beliefs and ambitions to make a positive socio-economic impact,” Manturov said.
The determination to make a real difference is especially true for millennials, with 86 per cent of those who were born in the early 1980s to late 1990s becoming increasingly aware of the world’s social and environmental issues, and driving the rise of impact investing by supporting companies that provide certain standards, according to Freedom Finance Europe data.
“Essentially, for such people, it is not only about helping solve the world’s problems, but is also a great way to express their opinions, generate investment return and safeguard their own future,” Manturov added.
The rise of impact investing
Although this trend may have started as a domain for some well-off individuals, it is now conquering the larger retail market, with a significant number of investors looking towards companies that are making efforts to combat climate change.
“Alongside this, with more and more companies re-thinking their CSR strategies and prioritizing their efforts to make a socio-economic difference, there will be an increasing number of opportunities available for those who want to invest based off their beliefs for a better world,” Manturov said.
Ultimately, while younger generations are clearly more conscientious investors than previous generations, combining investing and social responsibility is something that a range of population groups strive for and the basis for creating products that would satisfy such needs is already here, he stressed.
“As long as such social investments bring profits, their popularity is going to rise. And with millennials expected to inherit around $68 trillion in wealth over the next ten years, impact investing will only continue to grow,” Manturov concluded.