Responsible Investing: More Than A Trend – An Evolution
To make a positive impact on others and still work toward achieving your financial goals, you need an investment option that prioritizes both endeavors. This is what the responsible investing movement is all about. Investments based on environmental, social and governance (ESG) concerns enable investors to align their finances with their values. And by choosing products that consider the social impact of investments, investors demonstrate demand and encourage municipalities and corporations to sponsor more socially conscious projects and employ sustainable practices.
Numbers don’t lie
It’s safe to say that the responsible investing movement is here to stay. According to the U.S. SIF Foundation’s 2014 report on U.S. Sustainable, Responsible and Impact Investing Trends, a “growing number of investors, institutions and financial professionals are deploying and managing capital to build a more sustainable and equitable economy.” In fact, U.S. sustainable, responsible and impact investing (SRI) assets under management increased 76% over a two-year period beginning early 2012, reaching $6.57 trillion in 2014.
The ExodusPoint Partners International Fund returned 0.36% for May, bringing its year-to-date return to 3.31% in a year that's been particularly challenging for most hedge funds, pushing many into the red. Macroeconomic factors continued to weigh on the market, resulting in significant intra-month volatility for May, although risk assets generally ended the month flat. Macro Read More
As detailed in a summary of the report, the dramatic increase in SRI assets reflects several drivers and trends, including:
- Money managers increasingly incorporating ESG factors into their investment analysis and portfolio construction, driven by the demand for ESG investing products from institutional and individual investors and by the mission and values of their management firms
- Growing commitment on the part of institutional investors and asset managers to the Principles for Responsible Investment, a global framework for taking ESG considerations into account in investment analysis, decision-making and active ownership strategies
- Increase in negative screening by money managers within their funds, as well as strategies of positive screening, impact investing, sustainability-themed investing and especially ESG integration
- Adoption of policies restricting investments in firearms in the wake of the Sandy Hook Elementary School shooting
- Growing concern surrounding climate change and gas emissions, and increased momentum around fossil-free investment
- Number and proportion of shareholder proposals on social and environmental issues that receive high levels of support trending upward
Move over, baby boomers
Another significant factor in the growing demand for responsible investments lies in the demographic shift taking place in the U.S. According to population estimates released by the U.S. Census Bureau in April 2016, millennials have surpassed baby boomers as the nation’s largest living generation. Millennials, commonly defined as those ages 19-35 in 2016, now number 75.4 million, surpassing the 74.9 million baby boomers (ages 52-70). And Generation X (ages 36-51 in 2016) is projected to pass boomers in population by 2028.
What does this changing of the guard mean for the responsible investing movement? A 2011 Pew Research survey found that Gen-Xers, and particularly millennials, are more concerned about environmental issues and global warming than baby boomers.3 As the younger, more socially conscious generations begin to outnumber the older generations and pour more of their money into investment products, the responsible investing movement has the potential to grow exponentially.
Join the evolution
Municipal investments are making a difference in your neighboring communities, whether by increasing access to education, health care, affordable housing or quality employment among underserved or at-risk populations, or by investing in projects that strive to mitigate the negative effects of climate change and environmental degradation.
And you don’t need to sacrifice financial return when you select a social investment; in fact, a strong credit research process that proactively looks for sustainable practices can uncover opportunities you may not otherwise find.
Built to help you maximize your after-tax return, Columbia U.S. Social Bond Fund may be the solution you and your financial advisor have been searching for. The fund’s strategy is based on the conviction that social and financial objectives don’t need to be mutually exclusive and can be pursued within a single solution. With a minimum of 60% of its portfolio invested in municipal bonds — bonds built to serve public needs — the fund is well-positioned to provide societal benefits while delivering tax-exempt income for its investors.
The support of Sustainalytics, a leading independent provider of ESG research and analysis, ensures that the fund’s management team is doing what it says it is doing. Sustainalytics provides a tangible measurement of the fund’s social impact in the form of an annual Social Impact Report. The work of Sustainalytics keeps the fund’s managers accountable — to be more than a marketing gimmick — to be a vehicle that truly allows shareholders to see they are making a positive impact while working toward achieving financial goals.
See the full PDF below.