Although the economic, social and environmental goals of both types of investing are the same and complement each other, their processes and applications differ. While the former emphasizes measurement, the latter focuses more on maximizing a positive impact.
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”.
ESG analysis as part of the basic analysis
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.
Social and economic impact
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.
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