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What is sustainable and impact investing?

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What is sustainable and impact investing?

Many companies are rethinking how they do business, from reducing their impact on the environment to increasing gender and racial diversity in the workplace. Whether you want to live out your beliefs, help solve society’s biggest challenges, or target companies poised for long-term success, you may be able to pursue your goals through sustainable and impact investing.

Ways to invest for the greater good

To make a difference with your investments, look for companies that strike the right balance between financial gains and making an impact, in one of three ways:

Seeks to reduce negative social or environmental effects and manage risk by limiting certain exposures.

Seeks to support positive social or environmental practices and enhance potential for long-term competitive financial returns.

Seeks to advance positive, measurable, social, or environmental outcomes and target opportunities where impact is intrinsic to financial performance.

Is it possible to make money while making a difference?

60% of impact investors say their investments met return expectations, while 19% say their returns exceeded expectations. Additionally, 80% of impact investors argue they did not have to forfeit financial returns for impact. 
Source: Campden Research: Investing for Global Impact – A Power for Good 2021

While performance results have varied over time, companies with better scores on board diversity and management diversity saw consistently higher future return on equities than counterparts with lower scores.

Source: BofA Global Research, “Thematic Investing: The She-conomy”

“In the very near future, the words ‘sustainable investing’ will just be ‘investing.’”
-Chris Hyzy, Chief Investment Officer, Merrill and Bank of America Private Bank

Who invests this way?

More and more people—especially younger investors—are interested in sustainable investing. They’re putting their money into the causes they care about.

75% of Investors under 40 years old
49% of the general population 

Source: Cerulli US Retail Investor Edition Survey, 2021

How to find the right companies

“Paying close attention to companies’ environmental, social and governance (ESG) practices can help investors spot weaknesses before they appear on a balance sheet.”

-Anna Snider, Managing Director, head of CIO Due Diligence in the Chief Investment Office for Merrill and Bank of America Private Bank

92% of companies in the S&P 500 produce reports on corporate social responsibility.

Source: Governance & Accountability Institute (G&A): Sustainability Reporting in Focus 2021

Many investment firms offer sustainable and impact investing. Read more about this approach and investment choices available at Merrill.

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The material provided on this website is for informational use only and is not intended for financial, tax or investment advice. Bank of America and/or its affiliates, and Khan Academy, assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional and tax advisor when making decisions regarding your financial situation.

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Past performance does not guarantee future results.

The risk/potential reward spectrum is intended to provide a general evaluation of the risk and potential return of each asset category. It is not meant to predict future performance or the volatility of any investment option or category. Investors should carefully consider the investment objectives, risks, charges and expenses before investing.

Sustainable and Impact Investing and/or Environmental, Social and Governance (ESG) managers may take into consideration factors beyond traditional financial information to select securities, which could result in relative investment performance deviating from other strategies or broad market benchmarks, depending on whether such sectors or investments are in or out of favor in the market. Further, ESG strategies may rely on certain values based criteria to eliminate exposures found in similar strategies or broad market benchmarks, which could also result in relative investment performance deviating. Impact investing and/or ESG investing has certain risks based on the fact that ESG criteria excludes securities of certain issuers for nonfinancial reasons and therefore, investors may forgo some market opportunities and the universe of investments available will be smaller.

Investing involves risk, including potential loss of principal.

Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S” or “Merrill”) makes available certain investment products sponsored, managed, distributed or provided by companies that are affiliates of Bank of America Corporation (BofA Corp). MLPF&S is a registered broker-dealer, Member SIPC and a wholly owned subsidiary of BofA Corp.

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