A Brief History
The origin of what we call sustainable, responsible, impact investing dates back
centuries. In biblical times, Jewish law laid down directives about investing ethically.
In the mid-1700s, the founder of Methodism, John Wesley, considered the use of
money as the second most important subject of New Testament teachings.
For generations, religious investors whose traditions embrace peace and nonviolence
have avoided investing in enterprises that profit from products designed to enslave
or harm fellow human beings. It is likely that Methodist and Quaker immigrants
brought the concept of values-based investing to the “new world.” The Quakers
never condoned investing in slavery or war. And the Methodists have been managing
money in the U.S. using what we now refer to as “ESG Integration” for over two
The modern roots of this phenomenon can be traced to the impassioned political
climate of the 1960s. During that tumultuous decade, a series of themes served to
escalate sensitivities to issues of social responsibility and accountability. Concerns
regarding the Vietnam War, civil rights, and equality for women broadened during the
1970s to include labor/management issues and anti-nuclear convictions.
The ranks of responsible investors grew dramatically in the 1980s as millions of
people, churches, universities, cities, and states focused investment strategies on
pressuring the white minority government of South Africa to dismantle the racist
system of apartheid. Then, with the Bhopal, Chernobyl, and Exxon Valdez incidents,
the environment became top of mind for socially conscious investors.
In recent years, school shootings, human rights, Native American
issues, respect for indigenous peoples around the world, and
healthy working conditions in factories that produce goods for
U.S. consumption have become rallying points for investors with
dual objectives for their investment capital. Most recently, the
climate crisis has awakened investors to opportunities inherent in
directing investment capital toward a truly sustainable future.
Three Dynamic StrategiesA sustainable and responsible approach to investing includes both quantitative and qualitative
analysis. All investors look for profit potential, but responsible investors also integrate an evaluation of environment, social, and governance (ESG) factors into the investment ecisionmaking
A double bottom line (quantitative + qualitative) analysis provides the basis for designing
investment portfolios aligned with personal values and social priorities, while delivering the
returns needed to achieve an investor’s financial goals. Its a rigorous financial process that
considers the impact of an investment on all stakeholders.
ESG Integration. Management of environment,
social, and governance issues can have a
material influence on company profitability,
value, and share price. Qualitative ESG analysis
offers valuable insights into corporate policies,
practices, culture, and impacts. Analysis of ESG
factors can help illuminate corporate character
and identify better-managed companies.
Shareowner Engagement efforts include dialoguing with companies and filing proxy
resolutions to encourage more responsible corporate citizenship and more positive impact on
society at large. Efforts are focused on improving financial performance over time and
enhancing the well-being of all stakeholders—customers, employees, vendors, shareowners,
communities, and the natural environment.
Community Investing directs capital to people in low-income, at-risk communities
who have difficulty accessing it through conventional channels. Many socially conscious
investors earmark a percentage of their investment portfolios to community development
financial institutions (CDFIs) that work to alleviate poverty, create jobs, provide affordable
housing, and finance small business development in disadvantaged communities.
The US SIF 2012 Report
on Sustainable and
Trends in the United
States* has conservatively
identified over $3.7
trillion in professionally
using one or more of the
three dynamic strategies
that together define
impact investing in the
and community Impact nvesting.
In the seventeen years between the first Trends Report in 1995 and
the most recent report in 2012, responsibly managed asset pools
have grown from $639 billion to over $3.7 trillion, an increase
of 486%, versus a 326% increase in the broad universe of assets
under professional management as tracked by Thompson Reuters
Nelson.* Responsibly invested assets grew 22% between 2009
As of early 2012, nearly one out of every nine dollars under
professional management in the United States was involved in
some form of sustainable and responsible investing—that’s 11.3%
of the $33.3 trillion in total assets under professional management
in the U.S.*
What is Fueling the Growth
Information. Investors are significantly
better educated and informed today. ESG
research organizations provide higher
quality information than ever before. The
better informed investors are, the more
responsible our actions tend to be.
Climate Change. As consumers and
investors have become increasingly
aware of both the dangers and business
opportunities embodied in the climate
crisis, more and more are looking to
invest in solutions.
Performance. An impressive body of academic evidence plus real world results effectively
dispels the myth that ESG integration (qualitative analysis) will automatically result in
underperformance. Investors are realizing that responsibility can walk hand-in-hand
Availability. Some 361 funds* are designed for socially conscious investors. Responsible
investment options are increasingly being offered within retirement plans, and hundreds of
asset managers now promote their ability to manage responsibly invested portfolios.
Values and Authenticity. There is a spiritual yearning on the part of a large and growing
segment of the population to integrate personal values into all aspects of life, including
finance and investing.
Corporate Scandals. Numerous recent instances of accounting fraud and other scandals have
eroded trust in company leadership. Many investors are attracted to an investment process
based on research that goes deeper into corporate behavior and impact..
Women. As women have filled the ranks of MBA programs and law schools, climbed corporate
ladders, started their own companies, and assumed roles as fiduciaries, many have brought
with them an affinity for a more caring approach to investing.
Sustainability. The growth of sustainable, responsible, impact investing has marched in
lock-step with increasing public interest in everything green and good for you—natural and
organic food, renewable energy, green building, and alternative health care—providing new
inspiration and expanded investment opportunities.
Adapted from Sustainable and Responsible Investing in the United States by Steve Schueth.
Steven J. Schueth is President of First Affirmative Financial Network, LLC, an independent Registered Investment Advisor that specializes in serving socially conscious individual and institutional investors (SEC File #801-56587).
Past performance is never a guarantee of future results. Investing involves risk and investors may incur a loss.
* 2012 Report on Sustainable and Responsible Investing Trends in the United
States. US SIF - the Forum for Sustainable and Responsible Invesment is the
nonprofit membership association for the responsible investment industry in
the U.S. (www.ussif.org).