In History
A Brief History of Sustainable and Impact Investment: It’s Still Not Too Late to Save the Planet by Steve Lydenberg
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ustainable and impact investment are on the rise around the globe today. Integration of environmental, social, and governance (ESG) factors into investments is an increasingly accepted practice. Large investment managers now typically offer sustainability products and recognize climate change as a risk with which they must contend. Green bonds are a sought-after new asset class in the fixed income markets. The European Union is setting standards for ESG disclosure by corporations and investment firms. Estimates of assets under sustainability investment management now reach as high as $30 trillion.1 The remarkable growth in an investment discipline that 50 years ago was an easily dismissed footnote in the world of finance raises important questions about the nature and future of investing. What exactly are sustainable and impact investments? Why is interest in them so strong? Do they represent a fundamental, positive change 102 | Solutions | Fall 2020 | www.thesolutionsjournal.com
in investment or are they no more than old wine in a new bottle, a form of greenwashing capitalizing on baseless marketing claims? Having started in this field in the mid-1970s, I have followed its development with great interest, at various times worrying that it would be no more than a flash in the pan and that those entering the field were not true practitioners, and at other times amazed at its growing sophistication and embrace. Today, I believe the investment community has come to a tipping point at which this new approach may come to fundamentally alter the conduct of mainstream finance. Whether this potential will be realized remains to be seen, but powerful historical forces are pushing the investment community in this direction.