Impact investing is a further evolution of the integration of environmental, social and governance (ESG) factors into investment strategies alongside an overriding desire to ‘do good’ by delivering a social and total return.
Although impact investing has to date largely been seen outside the real estate asset class, institutional and private investors are increasingly looking at property as a credible option to satisfy their desire to make a positive impact.
So what has driven this trend? An increasing recognition of the environmental and social challenges facing the world has meant that investors’ attitudes towards merely thinking about black and white returns has shifted to employing a longer-term, more socially responsible approach.
Rise in ESG investment
In fact, a 2016 Bank of America research paper suggested that the millennial generation could put between $15trn (£11.8trn) and $20trn into US-based ESG investments – and in doing so double the size of the US equity market.
The Planet Earth-watching, reusable-coffee-cup generation is much more aware of the challenges facing our planet and is therefore becoming more attuned to investments that can make a positive impact beyond an economic return.
With the built environment accounting for 41% of all global energy usage, 40% of natural resource usage and 38% of all carbon dioxide emissions, this should not come as a surprise.