The concept of “investing for good” refers to making investments that not only generate financial returns, but also create positive social and environmental impact. As investors become more conscious about how their money is being used, there is a growing demand for ethical and sustainable investment options. Major asset managers like Domini Social Investments have built entire business models around socially responsible investing principles. This article analyzes how investors can skillfully combine pursuing investment returns with fulfilling social duties.
Socially Responsible Investing Has Seen Exponential Growth in Recent Years
Over the past three decades, investors like Domini Social Investments have continuously advocated diverting capital towards addressing pressing issues like environmental sustainability and global health. Their efforts have led to tremendous growth in the socially responsible investing (SRI) space – SRI assets under management in the U.S. have grown from $639 billion in 1995 to $12 trillion in 2018, an 18-fold increase.
Leading Companies Are Increasingly Focused on ESG Factors
In response to rising consumer awareness, companies across industries are paying more attention to ESG (environmental, social and governance) factors in their business operations. Hiring sustainable development officers and publishing annual ESG reports have become commonplace practices. Taking ESG considerations into account can both fulfill corporate social duties and generate long-term business value.
Skillful investors understand that portfolio returns and positive impact are not mutually exclusive. By channeling more capital towards sustainable businesses, investors can set in motion a virtuous cycle where companies place greater emphasis on ESG factors to attract investments. Achieving scale for “investing for good” requires persistence from both investors and businesses over the long haul.