Today, it is more common than before for younger people to think about the ethics of a business before they pull out their contactless cards. So the pressure is on for firms to show their positive impact on society – to attract customers and talent.
Morgan Stanley reported recently that millennials are twice as likely to invest in companies targeting social or environmental goals. This shift was also echoed last week as Love Island switched its sponsor from a fast fashion brand to eBay, who are now dressing the show’s contestants in second hand outfits to highlight sustainable clothing.
Put simply, people are increasingly likely to invest in organisations that have a positive impact on society – whether it’s the coffee they buy, the food they eat or which bank they choose to have a savings account.
As a consequence, businesses are not only creating more environmentally and socially focused products and services, but they are considering their wider corporate footprint, too.
COP26 showed that the mobilisation of private capital will be a crucial factor in solving the environmental challenges we face. I am very proud of the UK’s role as a world leader in financing the net zero transition – but we can always go further.
We know that creating the right conditions for financial markets to increasingly deliver positive social impact will be central to turning this into a reality. Yet ESG measurements have mostly focused on environmental impact.
So if we truly want to create a “just transition” – ensuring the shift to net zero is inclusive, so that communities in the UK and overseas are not left behind – we need to consider businesses’ social impact.
However, understanding a firm’s impact is difficult for two main reasons. First, defining what constitutes a positive social impact can be tricky. Second, the data on measuring social impact differs widely from organisation to organisation.
We need to correct this so that investors can recognise where companies generate a positive, measurable social and environmental impact, alongside a financial return.
The City of London Corporation, in partnership with the Impact Investing Institute and KPMG, will be hosting the Finance for Impact summit at The Mansion House on 18th July. Leaders of finance, business, governments, and other institutions from around the world will discuss how we can better harness investment for the good of people and the planet.
The Summit will build on the commitments made at COP26 and on the work of the G7 Impact Taskforce to improve the transparency and accountability of finance for impact.
We will hear recommendations for how the financial and professional services sector can be more ambitious when integrating social considerations into sustainable finance strategies, alongside environmental ones.
The summit will also sound the starting pistol on a “Just Transition Finance Challenge” for asset managers and asset owners. This will be a new coalition of investors, all committed to mobilising capital towards investing for positive impact.
Every financial decision we make has an impact. Through this work, not only will the UK continue to be a world leader on the ESG agenda, but we will help ensure that any impact our financial decisions make is a positive one.