All you need to know about sustainable investing.
Sustainable investing is a central theme taking the investment world by storm. Unlike in the past, institutional and retail investors are increasingly directing capital to companies, programs and projects that can address environmental, social and governance issues in addition to pursuing hefty returns.
Investors are not the only ones getting into ESG investing. Governments worldwide are also enacting measures and policies designed to promote environmental social and governance issues. As governments, regulators and capital markets get involved, so have sustainable investing firms of the likes of Altruist League cropped up all in the effort of directing investors to the right projects and investments with the potential of having the biggest impact on social issues.
“As more investors incorporate environmental, social and governance factors into their investment decisions, sustainable investing should become a force to reckon with” said Milos Maricic, President of the Altruist League.
Drivers behind Sustainable Investing
A recent survey by KPMG International, CREATE-Research, AIMA and CAIA Association of 135 investors, has for the first time, painted a clear picture of the key drivers behind sustainable investing. According to the study, institutional investors are the biggest drivers behind the growing demand for ESG oriented hedge funds.
Likewise, 55% of the ESG oriented hedge funds target alpha returns while trying to manage far off risks. However, a point of concern is that only 15% of hedge fund managers have incorporated ESG factors in their investment strategies. The small number of hedge funds could be attributed to, among other things, the lack of data to help managers make informed decisions with regards to ESG investments. The lack of data has further been compounded by risk factors associated with sustainability. The problem with sustainable investing is that the risk factors involved are not yet readily observable. Likewise, portfolio managers are forced to use proxies when it comes to determining the risks involved.
While traditional risk factors have gained credence over time, the new phenomenon around sustainability investing lacks the database to underpin status as a risk factor. Amidst the challenges involved in ascertaining the risks involved in impact investing a number of sustainable advisory firms have cropped up helping investment firms balance the risk-reward. It does not come as a surprise that sustainable investing firms have been able to venture more into ESG investing, even with limited data needed to gauge the risks involved. It also need to deal with the Millennial management.
Below are some of the firms that have advanced their sustainable investing strategies to the extent of being able to sink in millions of dollars into impact investing programs and projects.
Vital capital fund
Vital Capital Fund is one of the firms that has made impressive strides in sustainable investing. With about $350 million in assets under management, the firm invests in developing areas focusing on sub-Saharan Africa projects aimed at enhancing the quality of life. It deals with many grassroot level issues such what is straw – tomatobil.com and many other which directly impacts the financial life.
The fund mostly invests in the development of infrastructure, housing projects and renewable energy as well a healthcare and education.
Triodos investment management
Triodos Investment Management is one of the oldest impact investing firm that has been in operation since 1995. It is also one of the founding members of the Global Impact Investing network. With over $5 billion in assets under management. It has made a name for itself on investing in renewable energy, sustainable food, and agriculture.
It is also a big investor in healthcare and education.
BlueOrchard Finance S.A.
Headquartered in Switzerland, BlueOrchard Finance operates in more than 80 emerging and frontier Asia, Africa Latin America, and Eastern Europe markets. The ESG investing firm has invested in more than 200 million entrepreneurs across the globe.
The firm provides debt and equity financing to business and institutions to alleviate hunger and poverty while also fostering entrepreneurship. It currently has over $250 million in assets under management in addition to long term loan capital.
Reinvestment fund
Philadelphia-based, reinvestment Funds has made a name for it on investing in housing projects and projects geared towards enhancing access to healthcare. The ESG focused firm also invests in educational projects and initiatives.
The firm mostly operates by assisting distressed towns and communities in the United States. It currently has over $1.2 billion in assets under management.
The number of investment firms investing to promote social, ethical and socially responsible consciousness can only increase as the need to invest for a purpose increases. The emergence of sustainable advisory firms such as altruistic League providing much-needed data and areas to invest should continue to accelerate demand for impact investments.