From high school students to central bankers to the wealthiest global business leaders, awareness of our responsibility and accountability for our decisions has been growing in recent years. This was favored by several factors.
by Rosa Sangiorgio, Head of ESG, Pictet Wealth Management
First, there is an increasing sensitivity. Both private and public sector initiatives, from the EU regulation on sustainability reporting in the financial sector to the Principles for Responsible Investment and Responsible Banking, to name a few, have increased the clarity and reach information, catalyzing momentum. The financial industry has responded by making available a large variety of solutions and options, making them profitable the most easily accessible responsible investment.
According to, we are slowly moving away from the misconception of the penalty of returns, the idea that investing responsibly requires sacrifices in terms of financial returns.
As the number of responsible investing options expands, their track records also become more established. Many of these responsible investment products have outperformed their counterparts in times of crisis, and a growing number of studies confirm that responsible investment not only does not come at the expense of performance but often produces superior long-term financial returns.[1]
The third and most significant factor is the change in perception of responsible investment, from a means of mitigating risk to a means of capturing an investment opportunity.
A watershed moment came in 2015, when the United Nations published the Sustainable Development Goals (SDGs), a set of 17 common goals for 193 member states, aimed at protecting the planet and ensuring more equitable prosperity. Initially conceived for governments, these goals they require $3.3 to $4.5 trillion annually to achieve by 2030. Considering the level of public and private investment in sectors related to the SDGs, the financing gap was initially estimated to be $2.5 trillion[2]. This gap is where investors can locate the opportunities they are looking for. Businesses that can find solutions to today's most pressing problems will be tomorrow's winners and almost certainly a successful investment.
Each of us has a role in supporting the ultimate goals of sustainable development
and in ensuring that our needs are met
today without compromising those of future generations.
The number of opportunities and the variety of investment products available is rapidly expanding. While this in itself represents a significant step in the right direction, it is important to distinguish between investment products that consider E, S and G characteristics of portfolios in order to minimize long-term risks (both reputational and financial) from those aiming to get one specific positive social or environmental impact.
To date, measuring impact is far more complex than calculating financial returns or tracking E, S, and G characteristics. These are complex outcomes to measure and difficult data to collect. We also need to ask how much of the outcomes with a positive impact, if any, can be claimed by investors. We believe the next move towards broader adoption of impact investing will be in the measurement.
The first generation of investors looking for positive impact has focused on intentionality, today it becomes crucial additionality (the distinction between the impact of a company and the impact of investors). The future of impact investing lies in improving impact measurement practices. Data from companies and projects will be needed, but also high-quality research, strictly science-based, linking specific results and outcomes and impacts.
Each of us has a role to play in supporting the ultimate goals of sustainable development and in ensuring that our needs are met today without compromising those of future generations. Responsible investing, and impact investing in particular, allows us to do this through our investment portfolios.
Rosa Sangiorgio, Head of ESG, Pictet Wealth Management
[1] Source: NYU Stern Center for Sustainable Business and Rockefeller Asset Management. ESG and financial performance. 2021.
[2] https://unctad.org/press-material/developing-countries-face-25-trillion-annual-investment-gap-key-sustainable
