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Impact Investing Loses Some Of Its Shine

Editorial Staff

2 November 2020

Weighing the pulling power of impact investing in the midst of a downturn and related pandemic, healthcare and disease prevention unsurprisingly topped the list of themes US and UK investors care about, while environment and sustainability ranked top with Germans. But overall in all three regions, there was notable cooling on impact investing this year over last, according to a new survey by global asset manager .

In its fourth year of assessing where the needle is shifting on values-based investing, the report found that Millennials were the most committed to impact investing for the next five years, while Boomers, where the majority of global wealth still resides, were the least inclined. And the "S" in ESG is becoming a priority for investors enaging with companies.

Polling roughly 3,000 adult investors in September 2020, split between the US, the UK and Germany, the report found that the appeal for impact investing in the US dropped by 5 per cent to 51 per cent for the year, but was still up significantly from the 32 per cent showing an interest in 2016. The UK saw sharper declines in 2020, dropping by 11 per cent to 48 per cent expressing interest. There was a new entry this year - Germany registered just 25 per cent inclined towards impact investing.

While acknowledging that COVID-19 is inevitably shaking up investment thought, head of investment stewardship and ESG at American Century, Guillaume Mascotto, said that the firm has seen a positive swing towards the social “S” pillar this year.

“We believe that investors, particularly the younger generation, are more likely to scrutinise companies’ social performance and seek to find access to investments that generate positive outcomes for people and the planet without sacrificing returns. For example, our study shows that UK Millennials are more inclined to choose racial equality and social justice, improved education, and gender equality as their cause of choice compared to other generations,” he said.

The study also asked respondents how they felt about doing business with companies that align with their values. Again, results were down slightly this year. In the US, 29 per cent of respondents answered, “Yes, it matters to me,” compared with 32 per cent in 2019. And in the UK, 20 per cent felt it “matters” compared with 24 per cent in 2019. And in Germany, 41 per cent responded, “No, it does not matter to me.”

Also revealing, when given several factors to consider in making an investment, respondents in all three regions put “impact on society” at the bottom of the list. All three regions said “return on investment,” “risks,” “fees,” and “length of time the money will be invested” remained as the most important factors when making investments.