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Returns and Impact

| Posted by: Paul Donovan | Tags: Paul Donovan Weekly

  • The lower nominal return world is creating interest in new ways of investing. Impact investing and sustainable investing are rapidly becoming more important. Investors want both a normal rate of financial return and positive social outcomes.
  • There is a clear need for private money in sustainable investment. The United Nations has set out seventeen sustainable investment goals. There is no prospect of these goals being met with public money alone. Private wealth needs to be put to work. So far, private investment has fallen short of what is needed.
  • Private investment in sustainable goals brings local private expertise to global problems. Investors also benefit. The sustainable goals aim to produce a more efficient use of the world's resources. That applies to education (human capital) as much as the environment (natural resources). The efficiency increases financial returns.
  • Groups like the World Bank offer private wealth a simple way of investing. Bonds issued by such groups have comparable risk and comparable or better returns to government bonds. The money raised funds a variety of impact investment projects. These bonds have not traditionally been bought by private investors. That should change as private wealth looks for good returns that do good.