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Sustainable and Impact Investing 2020: Insights and Perspectives

Madeline Clark

Overview

  • Of the 202 Cambridge Associates clients that responded to the 2020 survey, 100 reported engaging in sustainable and impact investing (50%) and an additional 23 reported engaging in ESG integration and/or impact investing, though they answered “no” to the SII engagement question, bringing the total to 123 (61%) reporting engaging in sustainable and impact investing and ESG—a significant increase (25%) relative to our 2018 survey results.
  • Over the last two years, implementation of sustainable and impact investing increased by 2.5 times in the UK and Europe, surpassing US engagement, which also rose by 22%.
  • Institutions that do not engage in sustainable and impact investing mainly cited that their mission is solely addressed via programmatic/philanthropic activities. However, over a third of these institutions anticipate engaging in SII in the future, most within two years.

Investment Structure

  • The ways in which responding institutions incorporate sustainable and impact investing most often include: developing an Investment Policy Statement (IPS) that integrates SII priorities, principles, and decision criteria; engaging with advisor to implement; and informing their investment managers that SII/ESG is important.
  • Half of the institutions implementing SII strategies have less than 5% of their long-term investment pool allocated to sustainable and impact investing. Over the past five years, 75% of the respondents reported they increased their allocation to sustainable and impact investing. And importantly, over 80% of respondents reported plans to increase their allocation to sustainable and impact investing over the next five years.

Implementation Strategies

  • Institutions continue to employ a range of strategies to achieve SII objectives, including ESG integration, impact investing, negative screening, and program-related investments. ESG implementation rose significantly over the last two years, as did impact investing, in a shift away from negative screening as a commonly selected strategy.
  • Climate change and resource efficiency is the most common thematic focus area, followed by social equity and inclusion.
  • More than a third of institutions engaging in sustainable and impact investing consider racial and/or gender equity in investment decision-making. An additional third anticipate considering these factors in the future.

Madeline Clark, Associate Investment Director