Build Your Strategy Around What Matters Most

Impact Investing is a term used to encompass investing approaches that seek to achieve both a financial return and a societal contribution. Today, more and more investors want to learn how their money can be used to create social impact.

Impact Investing can empower you to have a positive impact on the world by aligning your finances with the values, causes and beliefs most important to you. You have the opportunity to integrate environmental, social and governance (ESG) values into your investment portfolio by supporting companies with best-in-class attributes. ESG not only focuses on sound corporate behavior, but often keeps capital safe.

Impact investing can deliver meaningful investment returns and powerful social change. There’s a long-run advantage to investing in ethical businesses. They have a good chance in outperforming. Impact investing in the U.S. now represents $8.72 trillion, or one-fifth of all investments under professional management.1


A Growing Body Of Data

As public interest in shareholder activism and impact investing has grown, companies have responded by making more data about their environmental, social and governance (ESG) policies available to the public. In 2011, 20 percent of S&P 500 companies published a sustainability or corporate governance report. By 2015, that number grew to 81 percent.2

In fact, data has illuminated various meaningful issues within corporate leadership.

For example, research confirms that globally, women make up only 13.8% of senior leadership in companies.3 It has also been shown that a strong correlation exists between greater gender diversity and corporate performance.

A study of 3,400 companies by Credit Suisse in 2016 found empirical evidence that companies with at least one woman on their board delivered excess returns at a CAGR (compound annual growth rate) of 3.5% from 2006 to 2016 over companies with no women on their boards.4 In addition, a study by research and advisory firm Catalyst found that more gender diverse boards aligned with stronger financial performance across different industries on metrics such as Return on Equity, Return on Sales & Return on Invested Capital.5

All this data is a boon to investment managers. It allows them to quantify the relative attractiveness of individual securities along identified ESG factors and fine-tune portfolios to meet specific impact goals.


ESG Integration: Allocating With Purpose

ESG integration is a relatively new development in impact investing. Unlike older strategies that excluded stocks of companies with undesirable environmental, social or governance track records, ESG integration strategies use data to rank, and invest in, environmentally friendly and socially aware companies that also implement solid governance policies.


Sophisticated Strategies: Lower Risk, Diversification

In the early days of impact investing, values-driven investors were limited to U.S.-based stocks and private equity funds. Today, impact investors can choose from an array of sophisticated global investment strategies across all asset classes, including equities, fixed income, real assets and other alternative investments.

What does this mean for the investor who wants to use their assets to affect positive change? Impact investors can now combine ESG strategies to increase their portfolio diversification to help manage overall risk and produce competitive returns.


Align Your Investments With Your Values

At LodeStar, we are excited about the potential impact investing has to help our clients align their values and investments - and be rewarded with the prospect of competitive returns for their efforts. We will continue to research innovative solutions that leverage our expertise to further enrich our clients’ implementation of this dynamic approach to investing for impact.

Whether you call it responsible, green, socially conscious, ethical or impact investing – we believe better returns and a better world aren’t mutually exclusive.

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1 “Report on Sustainable, Responsible and Impact Investing Trends 2016.” SIF Foundation
2 “Flash Report.” Governance and Accountability Institute, Inc. March 15, 2016.
3 “The CS Gender 3000: The Reward for Change.” Report from Credit Suisse Research Institute, September 2016.
4 Ibid.
5 “The Bottom Line: Corporate Performance and Women’s Representation on Boards.” Catalyst, 24 October 2007

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