We have seen an endless barrage of stories recently on impact and Environmental, Social, and Governance (ESG) investing — many negative and criticizing this style of investing. The reality is that impact and ESG investing supporters, practitioners, and investors should embrace the criticism as a sign of acceptance. Investors are challenging the status quo and want more transparency. The path to global harmony will continue to be rocky as returns will vary according to the current cycles and various viewpoints.
David Sand, CCM’s chief impact strategist, recently wrote a story on this topic that was picked up by ESG Clarity. In it, he mentions how “An investor with a well-constructed, mission-aligned portfolio understands and accepts that they will experience poor relative quarterly numbers in a market environment that favors oil and gas companies. That isn’t a bug in impact and ESG investing, it’s a feature. Far more important than short-term performance is the longer-term benefit of investing to be part of a better world.”
The bottom line is that there are gray areas of impact and ESG investing – just as there are gray areas of traditional investing – but just like any asset class that has its difficulties, you are making investments. And investments have risk – whether impact and ESG or not.
In 2020, impact investing reached roughly $715 billion in assets under management, according to GIIN. The International Finance Corporation (IFC) put the estimate even higher: $2.1 trillion.[1] The growth of the space is huge, and it doesn’t appear that impact investors, despite the recent claims against the industry, are going anywhere anytime soon.
Read more about the impact and ESG investing controversy in our new perspective.
[1] https://ssir.org/articles/entry/the_next_10_years_of_impact_investment#