Impact investing: investors prioritise social factors over environmental ones

Social or environmental impact investing: which one do investors prefer? And is impact investing actually profitable? Sean LaPointe has the answers.

ESG concept of environmental, social and governance.

Image source: Getty Images

The average UK investor, when given the choice, would prefer that their investments tackle social challenges over environmental ones. This is according to a new study by Big Society Capital that examines investors’ preferences for responsible causes.

Here’s a quick rundown of the study’s findings, as well as a look at whether impact investing can be profitable.

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Impact investing: what does the research show?

In its study on impact investing, Big Society Capital asked participants to choose three options from a list of social and environmental causes.

More than half (57%) of under-45s chose social impact investments of different types over environmental impact investments. The preference for social over environmental investments was found to be even greater among younger investors. Some 67% of those under 25 chose social over environmental impact investments.

Health and wellbeing, in particular, got the most interest among investors between the ages of 18 and 24. Almost four in ten (39%) said that they would choose to invest their money in this area.

The study found that as investors get older, their concern for environmental factors tends to rise. For example, 57% of those aged 55 and up want to invest in environmental protection, compared to 42% of those aged 25 to 34.

Commenting on these findings, James Westhead, head of engagement at Big Society Capital, said: “The interest in social impact investing is really encouraging as it has a huge role to play in supporting charities and social enterprises that provide essential services across the country, as well as contributing to the levelling up of the economy. 

“Now is the time to capitalise on the huge social benefits that social impact investing can bring.”

Is impact investing profitable?

For a long time, the myth has been that investors have to choose between a positive impact and financial returns. One of the arguments for this belief is that impact investments cannot be scaled sufficiently to generate good returns.

However, new research has dispelled this myth. The data shows that impact investments can perform just as well, if not better than conventional investments.

In a survey by the Impact Investing Institute, for example, 90% of respondents with impact investments reported that their returns in 2020 were either in line with or exceeded their targets.

And, in the GIIN’s 2020 Annual Impact Investor Survey, 88% of respondents reported that their portfolio performance met or exceeded their financial return expectations.

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How can you get started with impact or sustainable investing?

If you want to make a positive social or environmental impact, then it’s quite easy to get started with impact investing.

All you need is a trading platform that gives you access to these kinds of investments. There are several such platforms in the UK. Most have tools you can use to screen available investment options, such as funds and shares, to find those that meet your impact investing goals or criteria.

Once you’ve decided on a platform, consider investing through a stocks and shares ISA. Any returns from investments in a stocks and shares ISA are tax free. This can make a big difference to your total investment returns over the long term.

If you want to learn more, check out our comparison of some of the top-rated stocks and shares ISA providers in the UK.

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