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The Rising Trajectory of Sustainable Impact

Plants growing in money

We have seen the rising Sustainable Impact of sustainability acceptance move from a base of denial at first, on to gradual acceptance of the science behind pollution and climate change.

After many years of resistance, we have watched as major financial institutions in the last two years have finally come to accept the necessity of using ESG criteria in selecting investments.  While ESG literally stands for Environmental Social Governance, the initial acceptance of its difficult message was aided by its vague and subjective definition:   in my mind ESG came to mean Easy Soft Goodness.

At first, this movement placated those who were impatient to see change.  Now, all the major financial institutions have ESG portfolios and proudly announce ESG criteria, but finally people have started to notice that there is not a substantial difference between a typical ESG portfolio and the S&P 500.  

Of course, there is a good reason for that. The reason is that ESG has gained acceptance as a negative screen on investments recommended by traditional criteria. And of course it’s a good thing we have been able to exclude the worst polluters.   

However, finally, the world has awakened to the necessity of making positive impactful investments that actually change and improve the state of the world, at the same time as making a profit. This movement has been termed “sustainable impact investing.”

As you review the statistics related to sustainable impact investing, you soon discover that 90% of the true sustainable impact investments are private investments. There’s a good reason for that. There’s a consensus bias in publicly held companies to do and say things that will be favorably viewed by the vast majority of the public, including the buyers of publicly traded shares. It’s been rather awkward for a public company to make visionary impactful investments for fear of being misunderstood by the public  or fear that an innovation will fail.

Accordingly, various investors have discovered through trial and error that the best way to make sustainable impact on the world is to make a private investment. The private investment can be structured to maximize the opportunity for sustainable impact. The private investor can choose selectively the opportunities that have the greatest probabilities for profit, as well as the greatest probability of positive impact on the world.

Sustainable impact investment then gives rise to the need to verify and validate the impact. This in turn has led to greater knowledge.  

For example, the studies now show that sustainable impact is best achieved by making well researched, carefully structured, but ultimately visionary investments  where impact is measured and praised. Private investments offer the greatest opportunity for the customization of the investment in order to achieve both profitability and impact.

April 24, 2019

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