Ethical investments are no longer the domain of a select few socially-conscious investors. Interest in responsible investing has swelled to become a phenomenon that is sweeping across all types of funds and projects, creating new opportunities and growing to match the preferences of the astute investors. This is an exciting time for ethical investment. Here are five of the latest trends to watch:
Addressing Homelessness with Social Impact Investing
Housing development has always attracted a lot of attention from investors, but lately, far more emphasis is being placed on the community impact of developments. Ethical investors and the funds that cater to them are beginning to engage developers who care about the social impact of their developments. More specifically, investors are trying to avoid contributing to community problems that result from imbalanced development, such as gentrification and housing crises that force young residents out.
Developers, in response to this pressure, are starting to plan around creating a balance of housing in their projects, instead of housing developed exclusively for the most affluent. Affordable housing wings are becoming a more common part of even luxury development projects. This emphasis helps protects the diversity in even high-demand areas into the future.
A New Focus on Renewable Infrastructure over Research
Green technologies have always been an important part of ethical investment, but the focus of these funds is starting to change. Research and development has taken a backseat now that energy sources such as solar collection have become viable models pursued on an international scale. The modern ethical investor is now far more interested in visionary applications of this working technology—specifically a speedier development of massive renewable infrastructure capable of finally replacing the infrastructure of the last generation of energy.
Modern cities are going to be a greater challenge, so many renewable energy infrastructure developers are choosing to focus on the developing world. Ethical investors appreciate these projects both for their positive impact on developing communities and for the lessons the entire world will learn as these projects succeed and scale up.
Greater Accountability through Data
In most countries around the world, a fund does not have to meet any requirements to label itself as ‘ethical’. This presents a challenge for investors who care deeply about whether their
investment is being used the way they intended. Fortunately, the arrival of “Big Data” created the potential for countless new tools for evaluating ethical investments.
Complex corporate or fund structures once made it more difficult for investors to understand how their investments were being used. This was not only a concern for investors, but also for the managers of these funds who were accountable for assurances to their ethically-conscious clients. The rapid expansion of data collection and analysis methods within the past few years has made it far easier for firms—and their media and shareholder watchdogs—to evaluate the path and effect of any money that is invested. These new tools provide for a new level of transparency and accountability that may lead the way to far more transparent investing in the future.
Ethical Practices that Outpace Regulation
Major corporations and their local regulatory bodies are not always the closest friends. However, in response to many influences, including the growth of ethical investments, corporations around the world are outpacing their own regulators when it comes to adopting more sustainable and socially-conscious practices.
The most interesting part of this trends is the effect: These companies are being rewarded not only by investors who are flocking to more sustainable funds, but also by consumers who are increasingly showing a preference for brands that share their values. Even in countries like the US, where there is little state pressure for more sustainable practices, companies are choosing to assume that leadership for themselves.
More Profitable Ethical Investment
In part because of the trends that were covered earlier, ethical investments are on track to be a better opportunity than ever before. The challenges faced by the world, including diminishing supplies of water and oil, have galvanized investors all over the world to make impact awareness part of every investment. Instead of resisting, companies appear eager to partner with their investors to tackle these problems in a way that promises a better world for everyone.
With more funds ready to serve investors, more exciting projects to pursue and better data to evaluate all of it, ethical investment is going to be far more than just a strong trend through 2018—It stands to change the face of investing forever.
