How can a Career in Finance and Investing be Sustainable?
Impact investing is an area concerned with making investment in social and environmental ventures to both make a positive change, as well as generate a financial return. By using capital, either in your career or with your own personal finances, to positively impact different areas of interest, a person can aid in making a difference to areas they are interested in.There are currently over 1,340 organizations that are managing impact investing assets worldwide addressing a diverse set of needs related to social and environmental challenges.
Why is Impact Investing Important?
- Only 40% of developing countries have access to formal banking services like savings, loans, and money transfers.
- In 2019, the global impact investing market was estimated to be $502 billion.
- 75% of retail and institutional investors apply at least a quarter of their portfolios to Environmental, Social, and Governance principles (ESG).
- In 2018, 90% of impact investors stated that their investments were either meeting or exceeding their projections.
- 60% of investors are actively tracking investments with respect to Sustainable Development Goals (SDGs), 15-year global goals established by governments, businesses, and non-profits in 2016.
- There is strong future growth opportunity, with 15,000 investments projecting a 14% growth rate in the volume of capital invested.
Careers in Finance and Investing
Think Wall Street offers the only opportunity in finance and investing? Think again. With high profile corporate scandals and the global economy’s volatility, we’re seeing a major shift in the public's expectations of the finance industry, including how it calculates and contributes to societal and economic value. Successful new ventures and investments are proving that a career in finance can create real social and environmental impact as well as financial returns.
Finance can be defined as the management of money with regard to areas such as investing, borrowing, and lending. There are three main areas of finance: personal, corporate, and public or governmental. In regards to finance, an investment can be thought of as a monetary asset that is purchased and meant to provide income or a financial return. Impact investing is using these monetary assets for ventures focused on social and environmental goals.
What to Expect from a Career in Impact Investing and Sustainable Finance?
The lowdown
Crunch those numbers
No surprise here: finance and investing jobs require some serious time with numbers and the CFO. If the impact part really draws you but you barely got through high school math alive, you might need to try another path.
Like coffee?
Just because you’re using finance for good doesn’t mean you won’t be putting in finance hours. While some might be able to turn their passion into self-sustaining energy, others may need to resort to more traditional ways to fuel themselves for late nights, or become masters of collaboration and time-management apps.
Regulation’s a fact of life
Innovative approaches still need to comply with the law, so regulatory requirements are part and parcel of the field. The Dodd Frank Act may not be the most fascinating bedtime reading, but it’s worth keeping on your nightstand if you’re considering a career in finance.
Skills and education for a career in Sustainable Finance
As impact investing covers a wide range of industries and careers, the education and skills needed are varied. A person can pursue education beyond an undergraduate degree in areas such as an MBA, MPA, or MSW to target social and environmental goals. A person interested in environmental and natural sciences should have strong research and analytical skills. A person in marketing and media should have strong communication and writing skills. A person interested in social activism should have solidified entrepreneurial and communication skills.
You can also seek advice and information from a variety of sources. One example is Net Impact’s Impact Careers Course that helps individuals to navigate the impact sector.
Meet the players
Who's addressing finance and investing issues, and how?
Investors
- Asset managers and portfolio managers work on the “buy side” to incorporate sustainability into their management of pooled wealth, whether pensions and retirement plans like CalPERS, or mutual funds and ETFs like Trillium Asset Management and Parnassus Investments.
- Investment banks might get a bad rap, but many analysts and brokers here on the “sell side” conduct investment research and rate companies on their environmental, social, and governance (ESG) data and other factors. Banks like J.P. Morgan are engaged in impact investing, while Deutsche Bank runs a Climate Change Advisors group.
- Investment advisors and wealth managers help families and foundations make their impact through all types of investments (including stocks, bonds, cash, and real estate), and can include large financial services firms such as UBS, or smaller groups like Aperio Group and HIP Investor.
- Venture capitalists and private equity funds invest money in promising enterprises, largely in the energy efficiency, clean tech, and health and wellness sectors. Some, like DBL Investors and Khosla Ventures are 100% sustainability focused; others, like Kleiner Perkins, have specialties in sustainable industries.
Government
Government agencies map out and enforce financial regulations, make major investments in job creation and energy ventures, and even engage in impact investing abroad through the State Department, World Bank, and IFC.
Nonprofit organizations
Nonprofits include watchdogs like the Center for Responsible Lending who look out for predatory lending practices, advisory and thought leadership groups like Nonprofit Finance Fund, and impact investor networks like Investors’ Circle.
What’s Next?
There are a variety of jobs and career paths that an individual can take, whether they come from a financial background or not. Finance-related careers can include jobs such as advisories, analysts, and researchers for impact investing firms. People without a background in finance have options such as becoming a social entrepreneur, working towards ESGs in their respective companies, and working in companies that have goals related to social and environmental impact.