About the Impact Market
Impact Investing is a fast-growing sector of financial services that aims to produce financial returns for investors while also generating positive social outcomes.
Though the concept of socially responsible investing has been around for decades, there is no commonly accepted definition. Some investment products simply employ a negative screen to exclude tobacco, military weapons, fossil fuel exploration, or even an entire country due to political issues. Others target a specific market to include… such as firms involved with wind energy production. Most managers and funds today select companies using ESG (environmental, social, governance) scores. Several hundred of these proprietary ESG rating systems exist, each based on different and subjective factors. Impact investing, in contrast, puts the focus on the societal and environmental challenges to overcome. It focuses on the solutions needed to make a difference.
An Expanding Base of Interest
A substantial transfer of wealth from the post-WWII baby boomer generation to their children and grandchildren will occur over the next two decades. Increasingly these generations see investing as more than just a tool to produce returns; they want to ensure that their investments are made into areas that reflect their personal values or can be targeted to affect societal, social, or environmental change. Their goal is not just to invest, but also to have their investments make a positive impact and/or encourage change.
This interest is not limited to just the younger generations. Research has demonstrated substantial interest in impact investing among women and high net worth individuals. Likewise, increasing fiscal activism is challenging the boards of pension funds and endowments to look more closely at the investments they make. Whereas managers used to have greater flexibility to choose investments based solely on a risk-adjusted potential for return, they are now being asked to also consider socially responsibility.
As academic and industry researchers document that investments in social good can produce competitive returns, a fundamental shift in investing is occurring.
The SerenityShares Impact methodology was developed to benchmark the performance of companies whose products and services target social, societal, and environmental issues. Its passive methodology can serve as the core for financial products which can expand investor access targeting environmental (such as energy efficiency, renewable energy production, land and ocean conversation), social impact (such as agricultural productivity, community development, and food production and security), and societal needs (such as elder care and local access to health services).