The hype around ethical investing has not died down. Amounts flowing into funds based on environmental, social and governance (ESG) principles have ballooned by £84 billion over the past three years, while inflows to non-ESG funds actually shrank by £46 billion, according to Amundi, Europe’s largest asset manager.
At its most basic, ESG screens out “sin stocks”, which proponents say is just good risk management. The lawsuits and punishing regulation faced by the tobacco industry demonstrate how an ethical issue can fast become an investment issue.
Impact investing takes ESG one step further, ensuring that money goes to companies doing good for the world. It is now such a big movement that simply targeting companies widely considered to be “good” is said to pay off