A volatile year on global stock markets hasn't dampened investor interest for impact investor, research shows.
Millennials are the age group finding impact investing the most appealing, according to a study by American Century Investments. It found that 64% of UK millennials are interested in impact investing– compared to 60% in the US and 45% in Germany.
And while healthcare and the environment are the main issues on impact investors' minds overall, millennials are more focused on matters of choose racial equality and social justice, improved education, and gender equality compared to other generations.
Guillaume Mascotto, head of ESG at American Century, thinks The threat of Covid-19 has put a global spotlight on health and wellness and kept the topic front of many investors' minds. “The pandemic and its human, economic and financial costs is already prompting a growing number of people to re-evaluate their attitude to investing and approach toward the impact of their capital," he adds.
American Century surveyed more than 3,000 investors across the UK, US and Germany. While fees, performance and risk were among the top priorities named by those surveyed, roughly half of adults in the US (51%) and UK (48%) said they fnd the concept of impact investing appealing. And while many investors remain unconvinced (some 31% of UK respondents find the concept unappealing), another 42% say they would be willing to sacrifice returns to know their money was making a positive impact. Of course, this trade-off may not be necessary; recent figures show there is no evidence of having to sacrifice returns when investing sustainably.
Investment Ideas
The BNP Paribas Climate Impact and RobecoSAM Global Gender Equality Impact Equities are just two funds that come up when you screen for impact funds on Morningstar Direct.
The BNP Paribas Climate Impact is Bronze-Rated and Morningstar analyst Ronald van Genderen likes that the investment research is carried out by the team using a detailed 10-step process, looking at management quality, regulations, and risks.
The fund, which is co-managed by Bruce Jenkyn-Jones and Jon Forster, focuses on companies that conduct a significant proportion of their business in the environmental markets - alternative energy, energy savings, water treatment and conveyance, pollution control, waste management and related or connected sectors - and which respect the ESG principles set out in the United Nations Global Compact.
It is up 12% this year - 6.3 percentage points ahead of its benchmark, the MSCI World - and has generated annualised returns of 16% over the past five years. Among the fund's largest holdings are global forest company two-star rated Rayonier (RYN) and Dutch science-based one-star rated Koninklijke DSM NV (DSM), which occupy 3.8% and 3.5% of the portfolio respectively.
Meanwhile, the five-star rated RobecoSAM Global Gender Equality Impact Equities has a more specific remit, investing in gender equality to create a positive impact on the world.
In essence, the fund takes the stance that companies with strong gender diversity tend to have a greater competitive advantage and can therefore deliver better long-term returns. Indeed, it has produced annualised returns of 7.5% over the past three years, and is 3 percentage points ahead of its Morningstar Category, the Global Large-Cap Equity Blend.
Such a remit also means the portfolio contains a mix of holdings including payments giants three-star rated Visa (V) and two-star rated Mastercard (MA), as well as tech firms four-star rated Microsoft (MSFT) and three-star rated Alphabet (GOOGL).
