Learn

LEARN

Impact? ESG? SRI? 🤔



What is impact investing?

The growing impact investment market provides financial resources to address what some regard as the world’s most pressing needs. The IMPACT app lets you select specific issues you care about most such as Clean Air, LGBTQ Inclusion and Consumer Safety.


Why impact investing?

Impact investing challenges the long-held views that social and environmental issues should be addressed only by philanthropic donations.


Who is making impact investments?

Impact investment has attracted a wide variety of stakeholders, both individual and institutional.

  • 👨‍💼Fund Managers
  • 🏦Banks
  • 🤝Private Foundations
  • 💼Pension Funds and Insurance Companies
  • 👨‍👩‍👧‍👦Family Offices
  • 💁‍♀️Individual Investors
  • 🤲NGOs
  • 🙏Religious Institutions

How big is the impact investing market?

Impact investing is a relatively new term used to describe investments made across many asset classes, sectors, and regions. The Global Impact Investor Network (GIIN) estimates the total size of the market to be at USD 715 billion, managed by 1,720 organizations1.


What is ESG investing and how does it connect to impact investing?

ESG refers to the environmental, social and governance practices of an investment that may have a material impact on the performance of that investment. The integration of ESG factors is used to enhance traditional analysis by identifying potential risks and opportunities beyond current financial metrics.






Want to know more...



What are the origins of ESG?

ESG, which stands for Environment, Social and Governance, was derived from socially responsible investing practices. These focused on excluding certain products which conflicted with defined social, moral or ethical values and beliefs.

In fact, the concepts and rules of socially responsible investing, or SRI, may be traced as far back as 3,500 years ago. Different religious groups aimed to instill in its members certain values by prohibiting financial transactions related to alcohol, gambling, tobacco, firearms and other products.

In the modern era, the spotlight turned to public health and social welfare issues. The Community Reinvestment Act of 1977, for example, was designed to encourage financial institutions to help meet the needs of borrowers residing in low- and moderate-income neighborhoods.

And later, in the mid-1980s the Forum for Sustainable and Responsible Investment was founded after the partial meltdown at the Three Mile Island nuclear power plant spurred fears about environmental disasters.


ESG Investing – The World Takes Notice

While SRI practices centered on addressing social, moral and ethical concerns in the context of financial decision-making, concerns affecting the environment, society and corporate governance led to a more focused, financially relevant investment discipline: ESG investing.

The pivotal event that marked the inception of ESG investing – a strategy that has recently seen surging inflows into investment funds - goes back about 20 years. Kofi Annan, then the UN Secretary General, formed a joint initiative under the UN Global Compact with the International Finance Corporation and the Swiss government. The initiative was intended to devise ways to incorporate ESG into the global capital markets and yielded a report called 'Who Cares Wins'. Other efforts conducted by the UN resulted in another report, known as the 'Freshfields Report'.

A series of supporting frameworks was developed including the UN’s Principles for Responsible Investing (PRI) and Sustainable Stock Exchanges (SSE). Improvements in transparency and accountability were made through the Global Reporting Initiative (GRI), the International Integrated Reporting Council and the US-based Sustainability Accounting Standards Board (SASB).

By 2015, the UN established Sustainable Development Goals – a collection of 17 interlinked global goals that were designed as a blueprint to achieve a “more sustainable future for all". SDGs include eliminating poverty, zero hunger, building sustainable infrastructure, gender equality and climate action. They are intended to be achieved by the year 2030 and are used to serve ESG-investment frameworks.


wave
wave

Disclosures

  1. Information based on GIIN’s 2020 Annual Impact Investor Survey published June 11, 2020.

Sources: Global Impact Investor Network, Investopedia, Interactive Brokers’ Traders’ Academy ESG Investing.

Interactive Brokers Australia Pty Ltd (ABN 98 166 929 568) holds an Australian financial services licence, no. 453554, and is a participant of the markets operated by ASX, ASX 24 and Chi-X Australia and of the clearing facilities operated by ASX Clear and ASX Clear (Futures). Our registered Office is located at level 40, Grosvenor Place, 225 George Street, Sydney 2000, New South Wales, Australia

Interactive Brokers Australia does not provide financial product advice. The information available on this website has been provided for information and educational purposes only and has been prepared without considering your objectives, financial situations or needs. The information on this website should not be treated as advice or relied upon in substitution for independent financial advice.

Trading and investing in financial products carries significant risks and may not be suitable for all persons. You may lose all of the money you invest. Trading in derivatives or with any other form of leverage (margin), may result in losses surpassing your original investment or deposit. You should ensure you fully understand and accept the risks of trading and investing in light of your objectives, financial situations and needs before doing so. You should also ensure that you understand specifications that apply to any particular products you wish to invest in before doing so. We recommend you seek independent financial or taxation advice prior to trading and investing.

If available, it is important that you read and understand any Product Disclosure Statements ('PDS') provided by us before you decide whether or not to acquire any of the financial products to which the PDS relate. You should also ensure you acquire and read our Financial Services Guide ('FSG') and understand our legal terms before opening an account with Interactive Brokers Australia.

The information on this website about Interactive Brokers Australia and the products and services we offer may be accessed worldwide but is not intended for use by persons who are located in any place where, or to any person whom, such use would not be lawful according to the laws of that particular place.

Interactive Brokers Australia and its affiliates use cookies. Your use of our website and websites operated by our affiliates indicates your agreement to our, and our affiliates, use of cookies in accordance with our privacy policy.