Impact investing using ESG risk to create opportunity - Barnett Waddingham

Investors are now more aware of the risks to financial returns that come from environmental, social and governance (ESG) issues.

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... All organisations and investments have impacts in the real world. Companies produce goods and services that can make people’s lives better; they can contribute to solving the world’s problems. At the same time, companies create – even if unintentionally – negative impacts on society or the environment, like pollution, child labour, bribes and corruption, habitat destruction, resource depletion and carbon emissions that cause climate change.

Sustainability presents system-wide risks to the real world and to the markets that you operate and invest in, like climate change, inequality and biodiversity destruction.

To solve these issues, investors can direct capital towards achieving positive social and environmental outcomes. However, impact investing is distinct from giving grants and philanthropy, as impact investors are looking for opportunities to get ahead of changing policies and consumption patterns to achieve financial returns. They are looking to create social and environmental impacts at the same time as achieving, at least, the desired risk/return characteristics for their investment strategy.

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