Impact investing
How your investments can help make the world a better place
Important - The value of investments can fall as well as rise, so you could get back less than you invest, especially over the short term. The information shown is not personal advice. Ask for advice if you’re not sure an investment is right for you.
Climate change is one of the biggest challenges we face.
It’s causing sea levels to rise and weather patterns to intensify, and plant and animal systems are suffering. We’re destroying ecosystems that took millions of years to perfect, and that we depend on for food, medicine, and raw materials.
Plastic pollution is another significant environmental concern. It’s estimated that less than 10% of the plastic used globally is recycled, and around 8 million tonnes of plastic end up in the ocean every year. If current trends continue, there’ll be more plastic in the ocean than fish by 2050.
The problem goes beyond single-use plastics too. Microplastics are everywhere, from remote areas like the Arctic and Antarctic, to the depths of the Mariana Trench. They’ve even been found in lots of the foods we eat, from fruits and vegetables to alcohol and water – there’s probably some plastic inside you right now.
We also face serious social challenges. As people become wealthier and live longer, chronic conditions caused by unhealthy lifestyles, like diabetes and high blood pressure, are on the rise. Age-related diseases like cancer and dementia are also climbing rapidly. Not to mention that there’s massive health inequality across the globe, for example there’s a 33-year gap in life expectancy between Chad and Monaco.
How your money can help change the world
Impact investing can be a great way to help solve some of these environmental issues and support social developments. It involves investing in companies that generate positive, measurable social and environmental impact alongside a potential financial return. Examples include renewable energy companies, or education providers.
Alternatively, investors could choose dedicated impact funds. Fund managers using this approach will measure and report back on the positive impact that their funds set out to make.
We're not saying you should invest your whole portfolio in impact funds. We think the most successful portfolios are ones that invest in a range of different themes, types of investments, countries, and industries. But if you feel passionately about social and environmental issues, you could think about investing a small amount of your portfolio in them.
We take a look at two impact funds in more detail below.
This article isn’t a recommendation to invest. If you’re not sure if an investment is right for you, ask for financial advice. All funds will fall and rise in value so you could get back less than you invest. Both funds have the flexibility to invest in emerging markets, which increases risk.
Investing in funds isn't right for everyone. Investors should only invest if the fund's objectives are aligned with their own, and there's a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a diversified portfolio.
Baillie Gifford Positive Change
The Baillie Gifford Positive Change fund invests globally in companies that create positive change in one of four areas: social inclusion and education, environment and resource needs, healthcare and quality of life and addressing the needs of the world’s poorest.
A £10,000 investment made at the start of 2021 created the following positive impacts during the year:
- Avoided 1 tonne of carbon dioxide
- Provided education or training to 20 learners
- Delivered 7 vaccines
- Saved 11,740 litres of water
- Contributed to healthier lifestyles for 2 people
- Provided access to financial services for 3 people
Current investments include precision agriculture company Deere & Co, which aims to address the environmental impact of industrial farming. Its technologies reduce inputs of agrichemicals and fuel while helping farmers to increase yield. For example, their See & Spray Select System can reduce herbicide usage by 77%.
The fund also invests in several companies that are helping to improve our quality of life.
Dexcom, for instance, makes systems that help hundreds of thousands of diabetics across the globe monitor their glucose levels. Improving blood glucose control has been proven to lower the risk of developing diabetes-related complications by up to 49%. Elsewhere, Illumina makes gene sequencing machines which help improve our understanding of diseases, enable more accurate diagnosis and facilitate research into new therapeutics.
The fund invests in quite a niche area of the market, so we expect it to perform differently to other funds in the IA Global sector at times. It also invests in a relatively small number of companies, which adds risk.
FIND OUT MORE ABOUT BAILLIE GIFFORD POSITIVE CHANGE FUND INCLUDING CHARGES
BAILLIE GIFFORD POSITIVE CHANGE FUND KEY INVESTOR INFORMATION
FP WHEB Sustainability
The team behind the FP WHEB Sustainability fund invest based on nine sustainable investment themes. These range from resource efficiency and sustainable transport to education and wellbeing.
Every investment into the fund makes a positive difference. £10,000 invested into the fund in 2021 was associated with:
- Generating 4 MWh of renewable energy
- Avoiding 3 tonnes of carbon dioxide emissions
- Treating 190,000 litres of wastewater for reuse
- Providing 1 day of tertiary education
- Helping 3 people receive healthcare treatment and saving £2,500 of costs through more efficient healthcare systems
- Providing preventative care to 1 person to encourage a healthier life
One of the fund’s current investments is industrial gas producer Linde. The gases it distributes help to drive efficiencies across a range of sectors – from manufacturing to healthcare. In 2022, for every £1 million invested in the company, it helped to avoid 26 tonnes of carbon dioxide emissions.
The industrial nature of Linde’s operations means that the company’s current emissions are high. However, the firm’s dedication to reducing emissions through increased efficiencies, and their long-term target to be net zero by 2050, means they are one of the most sustainable firms amongst their peers.
The FP WHEB Sustainability fund looks very different to the wider global stock market, so we expect it to perform differently too. The fund's focus towards small and medium-sized companies adds risk.
FIND OUT MORE ABOUT FP WHEB SUSTAINABILITY FUND INCLUDING CHARGES