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Talking about trade-offs? Sustainability and impact: risks and returns

by Clare Jones

Morgan Stanley’s recent report on sustainable investing has been garnering global attention. It has clearly stated that financial return and social or environmental responsibility are not “trade-offs” – indeed, on the contrary, investments in sustainability can exhibit favourable risk and return profiles in comparison to more traditional investments.

We are constantly asked – in media interviews, by investors, by fund managers – how much investing for good means trading off returns. We thought it was about time to take a look at some of the numbers – we know sustainability is good for returns, and more and more impact investing seems to be as well.

It’s an important step for the growing impact investing movement. As calls for divestment from negative environmental impacts grow louder, sustainable investing looks to move capital into positive impact. It is worth noting, when seeing that Morgan Stanley find sustainability can positively influence risk and return, their definition of what they included in their “sustainable investments” definition (and doesn’t it sound very like impact investment?):

“We define sustainability as a commitment to economic well-being for both the present and the future, balancing society’s needs today with the demands of tomorrow. Sustainability encompasses behaviors, processes, tools and technologies that can be perpetuated and replicated in ways that achieve economic, social or environmental benefits. We see sustainable investing as the practice of mobilizing capital to businesses that engage in these behaviors and practices.”

Sustainability, then, can indeed be about doing good while doing well – and here are some statistics to help make it clear:

Statistics on sustainable investing returns

Image: Flickr / Håkan Dahlström – Wind power / Creative Commons