Is it sustainable? Maybe the largest and most talked-about generation in American history, the Millennials are beginning to have some influence and impact with their investments. Millennials are investing with a purpose and looking at their return on investment outside of the typical financial lens and more on a joint financial/social impact.
So what is Sustainable Investing? Sustainable investing, or impact investing, is a strategy that takes into account environmental, social, and corporate governance in order to generate positive financial returns and also have a positive impact on society. The goal is to invest in companies that are helping to alleviate poverty, investing in the community, and being environmentally friendly.
While not a new investing philosophy, sustainable investing is one that has been significantly gaining steam as of late. Assets under management (AUM) in Sustainable Investing Funds has grown to $8.72 trillion, up 33% since 2014, and now accounts for 22% of the total $40.3 trillion in AUM in the United States.
One of the main questions that remains: Is there a financial tradeoff between traditional investing philosophies and sustainable investing? According to the data we compiled from Bloomberg for the MSCI KLD 400 Social Index and the S&P 500, the short answer is not really.
As the largest wealth transfer ever is looming on the horizon (with Millennials likely to be the largest beneficiaries) sustainable investing is a strategy to keep an eye on.
*Past performance is not indicative of future results. An index is unmanaged and you cannot invest directly in an index. The S&P 500 is a market cap weighted Index of 505 companies. The MSCI KLD 400 Social Index includes 400 companies that have high ESG ratings relative to their constituents.
