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Sustainable Investing

relates to Sustainable Investing

Photographer: Buddhika Weerasinghe/Bloomberg

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Companies traditionally have been held accountable for one bottom line: profit. A growing number of so-called sustainable investors want two more measures: social and environmental impact. Skeptics say that advancing these broader and less well-defined goals is not the proper role of business. Whatever one thinks of the idea, gauging the social and environmental effects of any business is much harder than measuring how much money it’s made or lost. Accounting efforts are improving, however.

Sustainable investing goes by many names and encompasses a number of overlapping trends — among them values-based, socially responsible and impact investing. Assets managed using a broad definition of the approach reached $23 trillion at the start of 2016, a 73 percent increase from four years prior, according to a report funded by a group of financial companies, including Bloomberg News parent Bloomberg LP. In Europe, the largest market, the number reached $12 trillion. Some of these investors expect companies to be agents of social change, through the promotion of diversity, for example. Some stress robust corporate governance on issues such as executive compensation. Of rising interest are environmental matters like a company’s carbon emissions, water use and plastic waste. Consumers, too, increasingly care how companies conduct themselves in these areas and say they are willing to pay more for brands promoting a positive record. Of the world’s largest 250 companies, 92 percent reported in some way on their social and environmental impact in 2015, according to one survey. The Johannesburg Stock Exchange was the first entity to require companies to include such factors in their financial reporting, in 2010. A similar rule that took effect in the European Union in 2017 affects about 6,000 large companies. The market for green bonds — instruments issued by corporations, governments and financial institutions to fund environment-friendly activities — surged to $170 billion in 2017. That marked the seventh record-breaking year, though green bonds, by value, represented only about half a percent of all bonds issued in 2017.