Sustainable Impact Investing: Reaching Today's Eco-Conscious Consumers
Values-based investment for the good of the environment, diversity and equality
Consumers not only prefer to buy from environmentally responsible brands; they’re selective about the companies they invest in. Socially responsible investing is trending up, with sustainable investment rising by 38 percent between 2016 and 2018, according to data from US SIF.
Individual and institutional investors alike are sizing up companies for their efforts to reduce carbon emissions and waste, revenues derived from clean products and gender diversity among leadership.
By the same token, they’re skirting companies that produce or sell addictive substances like alcohol, gambling and tobacco while gravitating towards organizations engaged in social justice, environmental sustainability and clean energy.
“There’s no cookie-cutter approach to sustainability investing; intentionality counts,” Jane Marie Petty, director of social impact investing at Wells Fargo, said at a recent Wells Fargo Sustainability Summit in New York City.
Impact investing might be backed by one’s personal ideology, but that doesn’t mean there’s an ROI tradeoff. Petty said this popular misconception harks back to years past when sustainability investing was about “mixing stocks” and “there wasn’t investment thinking going into it.”
“When we look at investments we don’t only look at the fundamentals like profit and performance,” Petty continued. “We also look at how the corporation ties into the sustainable development goals.”
In 2015, the United Nations General Assembly declared 17 global goals for 2030 known as the Sustainable Development Goals, which included broad ambitions like eliminating poverty, gender equality and clean water and sanitation. However, sustainability goes beyond environmentally-friendly business practices; it includes a commitment to gender equality and diversity, social mobility, and investing in the community.
Businesses have embraced sustainability goals in myriad ways, like LUSH cosmetics eliminating packaging altogether with its line of “naked” shampoo bars, conditioners, henna hair colors and massage bars, or car manufacturers like Ford and General Motors investing in fuel-efficient and electric vehicles.
Others have made sustainability their raison d'être. Danish bioscience firm Chr. Hansen Holding, ranked #1 in the Global 100 list of the world’s most sustainable companies, generates over 80 percent of its revenue deriving natural solutions for preserving foods like yogurt and milk, and protecting crops using natural bacteria instead of pesticides.
In fact, consumers voice their opinions just as powerfully through the companies they choose to invest in as the brands they buy from, the views they espouse on social media and the demands they place on organizations.
“Proxy voting, shareholder activism, disclosures – we encourage corporations to do all of these things,” said Petty, who oversees efforts to promote and educate audiences about social impact investing and strategy.
Shareholder activism is when shareholders influence a corporation’s behavior by exercising their rights as partial owners. They may try to influence the board of directors or executive management, or they might garner media attention or publicize their demands online.
However, Petty cautioned that investors should beware of “greenwashing,” where companies cast themselves as more environmentally friendly than they really are to attract investment and secure a positive brand image.
Ask a lot of questions, and if you still don’t understand the company’s commitment to the cause after your advisor explains it, don’t invest.
“Don’t let everybody trying to get a piece of the action in this space intimidate you by using acronyms and linguistic malarkey,” she warned. “Investment people love to use acronyms and I try very hard not to use them.”
Here are a few tips to attract the socially conscious investor:
1. Understand your customer’s values
Most likely, your ideal customer and your ideal investor share a similar persona – although one buys from you and one invests in you, both must believe in what your company stands for and trust in the product. Therefore, by understanding the social causes your customers value most, you are more likely to attract the right kind of investor.
2. Avoid "greenwashing"
Just as “woke-washing” is viewed with the utmost disdain, "greenwashing" is when a company exaggerates its commitment to environmental sustainability without sound evidence to back its claims.
In today’s call-out era, where consumers distrust corporations by default until proven otherwise, it’s important to demonstrate concrete ways in which your company reduces waste, uses wind or solar energy, exclusively promotes from within or whatever your strategy may be.
3. Integrate sustainability into your marketing identity
If you can’t organically integrate sustainability into your brand identity, it’s a marketing campaign, not an organizational commitment. Be wary of being sniffed out as the brand that jumps on climate change causes exclusively on Earth Day, only to be radio silent the rest of the year.
On the other hand, if you consistently use sustainable supply chains, make conscious efforts to hire ex-convicts, or reduce packaging waste, make sure your audience is aware.