Investors most certainly can achieve their environmental and social goals via impact investing without sacrificing their financial goals, said Anna Snider, head of global equity and impact investing due diligence at Merrill Lynch Wealth Management (BAC) - Get Bank of America Corp Report .
"You can investing using environmental, social and governance (ESG) factors, alongside traditional financial analysis, and these strategies actually perform like the market performs or better when you are talking about a risk-adjusted format," said Snider.
Snider said the impact investing industry has evolved away from so-called negative screening, where investors may choose to remove sin stocks like tobacco, alcohol or firearms companies from their portfolios. In the last decade, she said impact investors have instead chosen stocks according to a company's best practices along ESG lines.
"Think about how companies use water, waste or energy, and what the bottom line impact is of that," said Snider. "Think about looking at diversity and human capital practices along social guidelines, and how the firm acts in their community. And think about governance, with all the accounting scandals and actions by the SEC."
According to Snider, Merrill Lynch does not vote proxies to push corporate managers to change their companies' practices. However, she said the firm does have mutual fund managers who will in some cases vote their proxies in favor of ESG reforms on behalf of investors.
She said the number of mutual funds that participate in impact investing has grown substantially in recent years, and more are in development.
"This is across all asset classes, public and private, equity and debt," said Snider. "We want to be able to offer all of our clients, no matter the account size, the ability to reflect environmental, social and governance issues in their portfolios."