Research from an international fund manager has shown the challenging market conditions pervading globally are seeing individuals worldwide shift to prioritising strong returns over impact investing.
“It seems that ongoing market volatility, and persistent inflation, has investors’ minds focused on returns rather than on the impact of their investment,” American Century Investments senior vice president and head of sustainable investing Sarah Bratton Hughes said.
Despite this trend, the study showed 57 per cent of Australians still found impact investing appealing in 2023, but this number had dropped from 63 per cent in the previous year.
Further, while investors on the whole are placing more importance on opportunities that generate higher returns, they still expressed a willingness to sacrifice some performance in order to create a positive impact. To this end, 30 per cent of Australians admitted they would be prepared to give up between 6 per cent and 10 per cent of their returns to pursue this outcome.
“A willingness to give up a proportion of expected returns shows that impact investors still expect to earn competitive returns and are making rational choices to realise an impact emphasis in addition to a financial return,” Bratton Hughes said.
She pointed out, however, that the two concepts are not necessarily mutually exclusive.
“While it is positive that investors are willing to sacrifice returns in order to realise the benefits of investing in impact funds, often this is not necessary as impact funds historically show returns in line with their non-impact counterparts,” she said.
“Identifying impact-related factors that could affect a company’s ability to stay competitive over the long term has the potential to add to returns.”
The study also revealed investors’ attitude toward impact investing was not significantly affected by instances of greenwashing, with less than one-third of respondents in Germany, Australia and the United Kingdom saying this type of practice was a concern to them.
The 2023 research was based on an online survey of individuals over the age of 18, with around 5000 participants drawn from Germany, Australia, the UK and Singapore.
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