This report outlines the rising importance institutional investors are giving to the environmental footprint of their partners and explores the inherent challenge in measuring the impact of investment, and the importance of qualitative analysis
The 'Impact Investing in Focus 2021' special report comprises five separate articles listed below, these can be read individually or as a sequence.
By A Paris – Institutional asset managers are on a journey to improve the impact their own business has on the world. As investor demands related to the impact of their investments increases, managers focused on providing robust impact information to clients are themselves becoming more introspective and making efforts to strengthen their own operations in terms of these factors as well.
In order to truly get under the skin of impact investing, asset managers cannot simply rely on third party ratings or even regulatory disclosures. Impact investment strategies, which aim to generate competitive financial returns alongside positive environmental or social impact, require combining quantitative data with in-depth qualitative analysis. Although third-party ESG or sustainability data and company disclosures can provide a helpful starting point, it is necessary for asset managers to conduct their own proprietary assessment to truly understand the activities driving a company’s business and the impact said activities have on society and the environment.
Detailing the impact of the revenues generated by every single portfolio company is intricate and labour intensive. However, this process supports a long-term investment horizon, promotes intimate company knowledge on behalf of portfolio managers and also encourages greater engagement with companies.
Public companies have a significant role to play in achieving the UN Sustainable Development Goals (UN SDGs). There is a growing realisation that their enormous firepower and resources will be a critical driving force to reaching many of the goals, boosted by investment and engagement by asset management firms and large institutional investors.
The Sustainable Development Goals (SDGs) have gained increasing attention in the last couple of years – at long last, one could add, considering the 193 member states of the United Nations approved the collection of 17 global goals as far back as September 2015. The SDGs address global challenges, including poverty, hunger, health, education, gender equality and climate change. Estimates of required investments to achieve the goals by 2030 range from USD 5 to 7 trillion per year.