Michele Leung, Green Finance Advisor of Friends of the Earth (HK)

Impact investing is defined with the objective to generate measurable social or environmental benefits, alongside with financial returns. The investors typically with a mindset that want their investment to make a difference in the world. According to an industry study*, 95% of millennial investors or 85% of individual investors are interested in sustainable/impact investing.

There is increasing interest to apply the principles of impact investing to private and public equities. Particularly for public equities, the impact can be quantified by defining actionable impact themes (basic needs, natural capital) and sets of solutions (i.e., major diseases treatment, sustainable water), then calculating company revenue exposure to products and services with positive social or environmental impact.

The 17 UN Sustainable Development Goals (UNSDGs) were agreed by 193 countries in 2015 with a target date for delivery of 2030. The SDGs aim to foster collaboration within and between international private and public stakeholders to address critical global challenges such as poverty, inequality, and climate change.

Companies’ contribution to SDGs can be analyzed based on their operations, the product, and services they provide, rather than solely relying on companies self-declared alignment with the goals. With this type of analysis, investors can identify companies that are better aligned with the SDGs, measure, and report on the degree of SDG alignment while also to comply with client mandates around SDG alignment. Most importantly, they can potentially meet the rising demand to channel capital towards addressing the objectives by the SDGs. 

*Source: Morgan Stanley Institute for Sustainable Investing. Sustainable Signals: Individual Investor Interest Driven by Impact, Conviction and Choice (September 2019)

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