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Market Decode: Is Impact Investing Right for You?

Discover how to invest in a way that can bring about positive effects in today's changing world.


THE IDEA OF SUSTAINABLE AND IMPACT INVESTING has been around for several decades, but it used to mainly involve “negative screening,” or avoiding investing in companies and industries whose products or practices do not meet investor standards. It has changed a lot since then: Today, sustainable and impact investing can be thought of as investments that seek positive social and environmental effects while targeting competitive financial returns. There’s now a wide range of investment options to choose from to fit your interests and needs.

As of 2019, there were more than 300 sustainable funds that intentionally integrate sustainability data into their investment process and an additional 564 investment solutions that take environmental, social and governance (ESG) data into consideration.1 And more and more companies are responding to growing investor interest. As the graphic below shows, in 2011, only 20% of companies in the S&P 500 published annual reports on their ESG data and practices. In 2019, that number had jumped to 90%.2

Bar chart graphic showing growth of ESG reporting by S and P 500 companies between the years 2011 and 2019. For 2011, it shows that 80 percent of companies were non-reporters and 20 percent were reporters, for 2012 it shows that 47 percent were non-reporters and 53 percent were reporters, for 2013 it shows that 28 percent were non-reporters and 72 percent were reporters, for 2014 it shows that 25 percent were non-reporters and 75 percent were reporters, for 2015 it shows that 19 percent were non-reporters and 81 percent were reporters, for 2016 it shows that 18 percent were non-reporters and 82 percent were reporters, for 2017 it shows that 15 percent were non-reporters and 85 percent were reporters, for 2018 it shows that 14 percent were non-reporters and 86 percent were reporters, for 2019 it shows that 10 percent were non-reporters and 90 percent were reporters. The source is the Governance and Accountability Institute, Inc., 2019

What’s more, research suggests that investors don’t have to sacrifice long-term growth when investing for impact. BofA Global Research found that a strategy of buying stocks that rank well on ESG metrics would have outperformed the broader market by up to 3 percentage points per year over the last five years.3 “There is growing data showing that impact investing may potentially produce long-term returns that are as good as, or even better than, traditional investing,” says Jackie VanderBrug, head of Sustainable and Impact Investment Strategy in the Chief Investment Office for Merrill and Bank of America Private Bank, in the above video.

“It just makes sense,” she adds. “Companies that are driving efficiency in water, waste and energy can help lower their costs, and better workplace policies may lead to more employee engagement and stronger revenues over the long term.”

Visit our sustainable and impact investing page for more insights into our approach to investing for impact, and then speak with your advisor about how you can get started.

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1 Morningstar, Sustainable Funds U.S. Landscape Report, 2020

2 Governance & Accountability Institute, Inc., 2019

3 “ESG from A to Z: a global primer,” BofA Global Research, November 2019

S&P 500 Index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Although the index focuses on the large-cap segment of the market, with approximately 80% coverage of U.S. equities, it is also an ideal proxy for the total market.

This material does not take into account a client’s particular investment objectives, financial situations, or needs and is not intended as a recommendation, offer or solicitation for the purchase or sale of any security or investment strategy. Merrill offers a broad range of brokerage, investment advisory (including financial planning) and other services. There are important differences between brokerage and investment advisory services, including the type of advice and assistance provided, the fees charged, and the rights and obligations of the parties. It is important to understand the differences, particularly when determining which service or services to select. For more information about these services and their differences, speak with your Merrill financial advisor.

The Chief Investment Office (CIO) provides thought leadership on wealth management, investment strategy and global markets; portfolio management solutions; due diligence; and solutions oversight and data analytics. CIO viewpoints are developed for Bank of America Private Bank, a division of Bank of America, N.A., (“Bank of America") and Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S" or “Merrill"), a registered broker-dealer, registered investment adviser and a wholly owned subsidiary of Bank of America Corporation.

BofA Global Research is research produced by BofA Securities, Inc. (“BofAS”) and/or one or more of its affiliates. BofAS is a registered broker-dealer, Member SIPC, and wholly owned subsidiary of Bank of America Corporation.

Bank of America, Merrill, their affiliates, and advisors do not provide legal, tax, or accounting advice. Clients should consult their legal and/or tax advisors before making any financial decisions.

Investing involves risk, including the possible loss of principal. Past performance is no guarantee of future results.  

Impact investing and/or Environmental, Social and Governance (ESG) managers may take into consideration factors beyond traditional financial information to select securities, which could result in relative investment performance deviating from other strategies or broad market benchmarks, depending on whether such sectors or investments are in or out of favor in the market. Further, ESG strategies may rely on certain values based criteria to eliminate exposures found in similar strategies or broad market benchmarks, which could also result in relative investment performance deviating.


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