Top 5 Impact Investing Trends
Considering adding impact investments to your portfolio? Glenmede’s Impact Investing team presents emerging trends for the year ahead:
1. Conducting Climate Change Scenario Analysis
According to the World Meteorological Organization, the last four years have been the warmest on record. If emissions continue at current rates, The National Climate Assessment estimates a loss of hundreds of billions of dollars by the end of the 21st century. Companies are beginning to react to investors’ climate change efforts, as illustrated by both the number of shareholder proposals and the percentage support for these proposals. In fact, Royal Dutch Shell and Climate Action 100+ released a joint statement in which Shell pledged to reduce its net carbon footprint by almost half by 2050.
New research suggests that investors in certain industries assume companies with higher carbon emissions also carry higher downside risk. Tools developed by the UN Principles for Responsible Investment are making it possible for investors to conduct “scenario analysis” to evaluate and potentially avoid these risks.
2. Promoting Diversity & Inclusion
In 2018, investment products with a gender mandate grew to $2.4 billion. With the growth of “gender smart” products, we’ve seen an increase in specialist data companies like Equileap, which make information about gender equality in the workplace more comprehensive and reliable.
Investors are also looking to access diversity and inclusion investments. This demand has led to several newly-created ETFs, such as the NAACP’s (National Associate for the Advancement of Colored People) Minority Empowerment ETF and InsightShares’ inclusion focused LGBT Employment Equality ETF.
3. Reducing Plastic Pollution
By 2050, there could be more plastic in the ocean than fish. Further, plastic production is projected to triple, while only 14% of plastic packaging is recycled. To engage companies on plastic packaging pollution, As You Sow recently launched the Plastic Solutions Investor Alliance to unite 25 investors representing over $1 trillion in assets. This Alliance championed a shareholder resolution asking Starbucks (SBUX) to develop a comprehensive policy on sustainable packaging. Investors are also recognizing new opportunities created by the demand for reduced plastic waste. For example, TemperPack, a company that produces an innovative line of compostable and recyclable packaging and insulation, recently reeled in $22.5 million in Series B funding to expand operations.
4. Combating Water Stress
According to the UN Water Project, two thirds of the world’s population live in areas that experience water scarcity for at least one month per year. By 2030, water scarcity in some arid and semi-arid places will displace an estimated 24 million to 700 million people.
Engagement resources are increasingly available to investors, like those from the Interfaith Center on Corporate Responsibility (ICCR) Water Stewardship Initiative. The ICCR actively engages 20 of the largest water consuming public companies, enabling investors to submit proxy votes on measures to conserve and protect water sources.
5. Advocating for Affordable Housing
Affordable housing is becoming a pressing issue both domestically and internationally. Tenants seeking affordable housing are being pushed out of metropolitan cities and available options are often in dire need of maintenance and repair. What investors may fail to realize is that these investments can provide a suitable risk-adjusted return, particularly because there is less turnover during downturns.
To ease the housing supply crisis in the U.S., policymakers have been incentivized to usher in legislation. Accelerating investments in underserved neighborhoods, including housing development, is the new tax incentive program creating “opportunity zones”. The legislation was designed to attract long-term private capital for investment in distressed communities. While the new legislation is not without controversy and potential pitfalls, those in the “opportunity zones” are hopeful that money is directed into places that need it the most.
If you have any questions, don’t hesitate to contact your Relationship Team or email us at Top5@glenmede.com.
No company or tool mentioned herein is endorsed by Glenmede. Links are provided as a convenience only and Glenmede bears no responsibility for the accuracy, legality, security or content of the external site. There can be no assurance that the ESG objectives of any of the investments described herein will be achieved, or that economic investment results will be positive. These strategies may not be available to or appropriate for all investors.
Glenmede’s Top 5 is intended to be an unconstrained review of matters of possible interest to Glenmede Trust Company clients and friends and is not intended as personalized investment, estate planning, tax or legal advice. Investment and wealth advice depends on many individual facts and circumstances we cannot account for here. For legal and tax advice, consult your lawyer or accountant. Opinions or projections herein are based on information available at the time of publication and may change thereafter. Information gathered from other sources is assumed to be reliable, but accuracy is not guaranteed. Outcomes (including performance) may differ materially from expectations herein due to various risks and uncertainties. Any reference to risk management or risk control does not imply that risk can be eliminated. All investments have risk. Please contact your Glenmede representative to discuss the applicability of any matter discussed herein.