Most people, when given the option, want their savings to make a positive difference to the world. Why then do so few actually make this choice?
Extinction Rebellion has provided powerful evidence of the public’s growing anger over the inaction of policy-makers globally in the face of climate change. Yet we as individuals also have responsibilities.
Most of us acknowledge this. We recycle our cardboard and try to use less plastic. We donate to charities that help disadvantaged children, or, particularly as Christmas approaches, give money to homeless people.
But we generally ignore the one way that we as individuals can have the greatest impact – through what we do with our savings and investments.
Earlier this year, the Department for International Development asked more than 6,000 UK citizens their views on how the money they saved or invested might contribute to the United Nation’s 17 sustainable development goals. These commit the 193 UN member states to delivering a “better and more sustainable future for all” by 2030.
More than three-quarters of those surveyed wanted their investments to avoid harm and achieve good for people and the planet. A majority said they would save or invest more if they knew their savings and investments would make a positive difference in the world, and nearly three-quarters of people with assets over £25,000 and three-quarters of millennials said they were interested in making a “sustainable” investment.
Yet the reality is that very few of us act on this. Most of the money in saving accounts and pension plans ends up being invested in large, publicly listed companies, either in the form of shares or loans. And while most of us may be lucky enough to have a pension, it’s very unlikely that we know in what it is invested.
Taking charge of our money, and the uses to which it is put, is about more than saving and investing in ways that avoid harm – for example by avoiding tobacco company stocks. It means being pro-active, investing in products that actually deliver benefits, and contribute to addressing issues like the lack of affordable housing or of renewable energy sources.
This type of investment – impact investment – actively contributes to solutions to the challenges we face as a society, whilst delivering a financial return.
At the moment, there are obstacles which get in the way of us putting our money to work like this. Many people save for their pensions through their employer, and don’t know how to find out how it is invested. Over half the respondents surveyed by the government said more information and more products would make them more likely to invest sustainably. Nearly two-thirds said they needed more evidence that they could get a similar financial return to a traditional saving or investment product if they changed their approach.
This is where we hope to help. The new Impact Investing Institute will try to address some of the barriers facing those who want to save in a different way.
It will raise awareness of impact investment among pension trustees and institutional investors, addressing some of the difficulties they face in shifting assets towards impact, such as a lack of data around the financial returns such investments deliver, or the need for companies to report more transparently and comparably on their impact.
It will help individuals save and invest in line with their values, by providing information on impact investment, and training to financial advisors. And it will help the UK’s policy-makers learn from the advances countries like France or Canada are making in this field.
At the moment, just $500bn of the over $100 trillion assets under management across the globe is estimated to be dedicated to impact investment. Achieving even a small shift in this number would potentially move billions of dollars into investment that will help deliver on the sustainable development goals, by funding a better and more sustainable future for us all.