Triple Bottom Line Investing
All companies have not only a financial return, but also a social and environmental return. Whether intentional or not, businesses make an impact on their customers, employees, the community, and the environment. Some companies create value while others extract value. The only question is whether we – as investors – are going to take these non-financial returns into consideration.
At IMPACTfolio, our process involves what we call “triple bottom line” investing by seeking an environmental return, a social return, and a financial return. These three sources of return are what we refer to as our 3 P’s: Planet, People, and Profit.
Quantifying the Results
You may wonder whether a focus on these non-financial considerations will negatively impact your financial returns. Recent research has increasingly shown otherwise. A Morgan Stanley report from 2015 concluded that “investing in sustainability has usually met, and often exceeded, the performance of comparable traditional investments.” In addition, it found that sustainable funds averaged lower levels of volatility than traditional funds.*
The following charts (click to enlarge) also illustrate that a sustainable or “responsible” approach to investing does not require sacrificing returns over the long term.**
*Additional info from Morgan Stanley Report: The research included the performance of 10,228 U.S. mutual funds over seven years. The results showed that returns of “sustainable funds” (a term used for various types of funds using social, environmental, and values-based screening criteria) were equal to or higher than traditional funds 64% of the time.
**Source: Russell 1000 Index, CALCOR. Prior to June 19, 2015, CALCOR was known as the Calvert Social Index. CALCOR changed certain of the construction methodologies, including the adoption of the Calvert Principles and a sector-constrained capitalization weighting approach. All data prior to June 19, 2015 reflect the Index’s prior construction methodologies.