More and more investors are seeking something more than just a quick bottom line return. They want investments that are in sync with their values and vision for a balanced, healthy future. It’s a far cry from the old pattern of blind-eye investing in destructive natural resource extraction, consumer products indiscriminately sourced and manufactured, and the production and distribution of toxic materials that might benefit the quarterly return – but wreak havoc in the long run.
Guidelines put forth by James Gorman, CEO of Morgan Stanley, include three key considerations:
1. Ensure a sustainable, resilient business model that contributes to a sound global financial system
Living up to this tenet requires a sound business structure – from capital reserves to risk-management procedures to corporate culture – and a commitment to an organization’s communities and environment.
2. Integrate long-term perspectives in evaluating investment opportunities
Consider long-term trends and their cumulative effects, as well as factors including natural-resource scarcity and climate change. Aim to anticipate the products, strategies, and services that the future will demand.
3. Invest time, talent, and resources to advance sustainable growth and prosperity for all
There are organizations appearing daily that seek to reinterpret traditional investment models for a rapidly changing world. According to Gorman, “the Institute for Sustainable Investing helps develop the next generation of long-term-oriented business leaders, in partnership with INSEAD and the Kellogg School of Management at Northwestern University, challenging teams of graduate students from around the world to demonstrate how investing can go hand-in-hand with positive social impact.”
According to Vikas Vii, staff writer for the Sustainable Development news and editorial section on Justmeans and author of The Power of Money (Scholars, 2003), “A growing interest in sustainable investing has encouraged the financial sector to offer more socially responsible mutual funds that are designed to meet the demand. Investors are increasingly looking to put their money behind investments that not only offer a healthy economic return, but also hold true to their personal values. As the menu of sustainable investment options widens, it will help driven even greater interest in sustainable investing.”
The Forum for Sustainable and Responsible Investment data shows that sustainable mutual funds represented $6.5 trillion at the beginning of 2014 – an increase of 76% in two years.
The Institute released a survey that shows that 71% of individual investors are interested in sustainable investing. Not surprisingly, it is younger people who are leading the way in socially responsible investing. Younger generations are better able to transmute their values into actual practices. Their awareness of and concern for environmental footprints and emerging alternatives translates into a higher likelihood that they will exit investments that do not conform with their fundamental beliefs.
With millennials set to inherit as much as $35 trillion, their values and beliefs will reshape the world. New sustainable investment products are taking shape to address their needs, a welcome shift from an investment model that was already stale a long time ago.