BUYING a gas-guzzling sports car might be disastrous for the planet, but what if instead you chose an electric model? And what if you were so impressed with its performance, you invested in the company which produced it, because you could see the climate benefits of moving away from fossil fuels and to clean energy?
Climate change is just one of many pressing issues which the UN wants addressed by 2030 under the Sustainable Development Goals (SDGs), but eradicating hunger, improving access to clean energy and protecting the planet will take more than good intentions.
Cash, and lots of it, will be required. For investors with a conscience, impact investing could provide a good return on their capital while ‘doing some good’. A term coined around a decade ago, impact investing involves channelling capital into listed companies which deliver healthy financial returns, but also have a long-term vision to solve global social and environmental problems. Examples of firms in this space include Danish energy company Vestas, which aims to bring renewable energy on a par with conventional, but polluting sources, such as oil and gas. Others include Belgian firm Umicore, a materials technology company which derives much of its revenues from clean technology, including battery recycling.
Irish firm Glanbia is also cited for its commitment to sustainable food production. “We’re looking to discover those companies that are able to deliver a positive effect on any of the sustainable goals through their products and services,” investment director in Aberdeen Standard Investments’ (ASI) impact investing team, Ross McSkimming, says. “You will get pure players like Vestas who want to do the right thing. We want to avoid those companies where it’s an inconsequential part of their business. They could be making charitable donations, but they don’t have that clear strategy.”