An increasing number of people attach importance to a sustainable way of life when it comes to investing. But is it really possible to have an influence on the finance industry by applying the law of supply and demand?

Antonia Strachwitz is responsible for Communications at LGT Impact Ventures

One-and-a-half years ago, the United Nations adopted the 17 Sustainable Development Goals, or SDGs for short. The international community had good reason to celebrate this fact: never before had so many countries set such rigorous goals for the preservation of our planet.

Since then, however, the enthusiasm has given way to a pragmatic wake-up call: how will the goals ever be reached without clear instruments for implementation?

Strength in Numbers

Governments and businesses bear significant responsibility for implementing the SDGs, but their resources are limited. Even the best laws and well-meant sustainability codes can only be effective if voters or clients are on board. The responsibility borne by each individual for the SDGs is therefore also strongly emphasized by the UN.

Our collective strength as consumers provides an opportunity to actively contribute to shaping the future: because every franc spent is a vote in favor of or against a more sustainable way of life. This applies not only to organic fruit sold at the grocery store, but also to investing. And there is indeed an identifiable trend in this area: the Bertelsmann Stiftung has ascertained that demand for financial products that not only generate returns for investors, but also promise a positive social or environmental impact tripled between 2014 and 2016.

Accordingly, the offering in this area is also growing. In 2015, the Forum Nachhaltige Geldanlagen (Sustainable Investment Forum) and Swiss Sustainable Finance reported an increase of 169 percent in the volume of sustainable investments in Switzerland compared to 2014.

Trendsetters: Millennials and Women

The biggest driving force behind a sustainable way of life is the so-called Millennial generation that is, the segment of the population that is currently aged between 16 and 34. And 84 percent thereof are explicitly interested in sustainable investments, and the likelihood that they effectively make such an investment doubles if sustainability is part of the value creation strategy.

Women also show a particularly strong interest in this segment: wealthy women are unhappy with the finance industry’s offering to date and 76 percent of all women are interested in sustainable investments.

Investing in Sustainability

According to estimates, in the coming decades, global assets totaling 30 billion dollars will be transferred to the next generation. This will benefit women in particular: it is believed that in the U.S., women will control two-thirds of wealth by 2030 and women have also outpaced men in terms of the number of new members in the group of self-made billionaires.

In the 21st century, sustainability and social engagement are becoming an increasingly central selling point for financial institutions. A number of Swiss institutions have already recognized this and are trying to use the SDGs as a framework.

LGT has dedicated itself to a number of areas of sustainability, and among others, applies «ESG» criteria (environment, social, governance) when selecting stocks. It has also been supporting social non-profit organizations for ten years. Further to this, the bank uses LGT Impact Ventures to focus on impact investing.

It takes a targeted approach to supporting innovative companies that provide social or environmental added value, while at the same generating attractive returns. LGT therefore makes a direct contribution to the SDGs.

A Contradiction in Terms?

The question that arises is therefore: can sustainable investments – and in particular their ambitious siblings, impact investments, – keep pace with traditional investments when it comes to returns? According to a study by Morgan Stanley, sustainable investment funds actually outperform traditional equity funds in terms of returns. In addition to this, they are less volatile.

The impact investing segment also holds great promise: based on the Global Impact Investing Network’s (GIIN) 2016 Investor Survey 84 percent of impact investors expect to see market rate returns (59 percent) or close to market rate returns (25 percent).

To date, they have been disappointed in only 11 percent of cases. This is good news for investors: it would appear they are not faced with having to decide between sustainability and making a profit. Financial institutions can heed the demands of their young and female clients without having to worry, while in the meantime also making an important contribution to the achievement of the SDGs.

Antonia Strachwitz is responsible for Communications at LGT Impact Ventures. After completing her degree in East Asian studies and economics, she worked for several years as part of the Liechtenstein delegation to the UN in New York.

At LGT, she wants to make a contribution to improving the quality of life of disadvantaged individuals by means of an entrepreneurial approach. She blogs about trends and issues surrounding impact investing and sustainable investments.