Sustainable investment vs. impact investment

Climate change, social and economic equality, healthy growth and full employment, access to resources and infrastructure, strong institutions, peace and justice. These are some of the principles that encompass the 17 United Nations Sustainable Development Goals (SDGs) to build a more sustainable planet. To achieve these goals, the UN estimates that by 2030, between 5 and 7 billion dollars a year will be needed, and to achieve climate neutrality (zero greenhouse gases) between 3 and 5 billion dollars more every year. 

In the search for this growth, supported by triple economic, social and environmental profitability, authorities and businesses are promoting sustainability by applying ESG criteria (Environmental, Social, Governance) and the promotion of projects that generate long-term returns in vulnerable communities. Put more simply and in the words of Quyen Tran, BlackRock Impact Investing Director, “ESG investing assesses how a company works and the impact investing this company produces or offers”. 

Sustainable or ESG investment goes beyond the efficient management of natural resources and involves organisations in general carrying out a series of actions aimed at the planet's environmental care, social equality and good corporate practices. Actions that seek to benefit all citizens and that are measured and quantified at regulatory level. 

In this regard, when identifying which companies to add to portfolios, investment managers apply ESG metrics together with fundamental analysis (exhaustive analysis of companies in terms of financial ratios, management team, competitive advantages and entry barriers). According to Goldman Sachs estimates, ESG assets under management in investment funds amounted to $2.1 trillion last year. In Spain, sustainable investment is approaching €380 billion managed, according to the Sustainable Investment Forum, Spainsif.

BBVA has incorporated sustainability as a strategic priority and promoted sustainable financing back in 2007, when it participated in the first issuance of a green bond by the European Investment Bank. A decade later, it undertook the Katowice Commitment, along with other banks, to adjust loan portfolios to the objectives of the Paris Agreement against climate change. This purpose was reaffirmed in 2019 when it signed, with another 206 banks, the Principles for Responsible Banking, and in 2021, as the co-founder of the NZBA (Net-Zero Banking Alliance), a banking alliance with net zero emissions. If this scenario translates into figures, BBVA has committed up to €300 billion in sustainable financing by 2025.

Meanwhile, impact investing seeks to respond to a social or environmental challenge by providing the necessary levers for a community to be self-sufficient over time, or by providing it with water management infrastructures that, by extension, serve for agricultural and/or livestock development; schools, to offer a better future for new generations; or transport, to promote its inclusion, for example. It is imperative that the impact can be measured. 

According to the global benchmark report on impact investing 2022: Sizing the Impact Investing Market, produced by the non-profit organization Global Impact Investing Network (GIIN), the volume of resources allocated already exceeds one billion dollars, specifically, 1.16 billion worldwide. In Spain, the latest available data from the Advisory Board for Impact Investing (SpainNAB) places the volume of investments at €2.4 billion.    

Beyond the sustainability actions of many companies, there are newly created companies or novel projects that have the ESG principles in their DNA. This is the case with the Nikin sustainable fashion brand, which has made sustainable investing its leitmotiv: it allocates part of each sale to tree-planting programmes, always produces in Europe based on short supply chains and environmentally friendly transport, and selects materials and manufacturers “in line with green, economic and social criteria”, as it explains on its website. As a result, the Swiss company created in 2016 works hand-in-hand with an eco consultancy. Not surprisingly, the UN considers the textile industry to be the second most polluting industry on the planet, and any initiative with ESG criteria leaves a positive mark. 

At international level, another example of a circular economy with a social and economic impact can be found in Kenya, where every year Ocean Sole transforms 50 tonnes of sandals used in artistic objects that seek to raise awareness of marine pollution and sustain impoverished communities in the country. 

Paraphrasing the investment magnate Warren Buffett: “Someone's sitting in the shade today because someone planted a tree a long time ago.”