Lorem ipsum dolor set amit
Opinion O
What Role do Banks Play?
Financial services organisations can and should step up to develop impactful investing
In a Thomson Reuters opinion piece, Mario Marconi, the former Head of Philanthropy & Values-Based Investing at UBS, articulated how banks should look beyond their social responsibility programmes by using their core operations – investment and finance solutions – for doing good. “Doing business and creating a positive impact on society aren’t mutually exclusive goals,” he wrote. “Throughout history, finance has played an important role in propelling social change, advancing living standards and creating good. Today the perception of finance is hampered and often associated with the opposite.”
That said, it is still the case that select areas of social intervention can be addressed more efficiently through market mechanisms. This is not to say that impact investing should be a substitute for philanthropic efforts, but rather that it should act as a complement to giving. Since 2001, for example, investment banking group Goldman Sachs has used impact investing initiatives to commit more than US$5 billion to find innovative commercial solutions that address social and civic challenges in communities across the United States. The bank’s investments have been directed to affordable housing construction, job creation, quality education, healthcare facilities and small businesses. Goldman Sachs’s approach has been to partner with local leaders and non- profit organisations, focusing on community development, financing for small businesses and social impact bonds. Under the last of these, private investors can launch programmes intended to make a positive social impact. Provided the projects achieve positive social outcomes and public-sector savings, investors receive a return on their investment from the government.
In recent years, a clear shift away from sustainability as a moral imperative to sustainability as an economic imperative has been evident. In 2011, for example, Deutsche Bank
created an Impact Investment Fund and a Social Venture Fund with a portfolio of five investments. The successful first fund saw investments into organisations such as Auticon, a software-testing firm manned by people with autism, Germany Rounds Up, which deals with micro-donations and VerbaVoice, which produces live transcriptions for the hearing-impaired.
to help clients gain a greater understanding of their current financial situation and how well positioned they are to meet their goals – in part through a goal-funding status analysis – and to continuously track progress towards reaching them. In the coming year, advisors who discuss and input clients’ impact-investing preferences into Wealth Outlook can present to these clients a range of appropriate solutions that reflect those preferences – among them, the firm’s proprietary Sustainable Impact Multi-Asset Class Portfolios and more than 20 individual impact strategies available via its investment advisory programme.”
Without a doubt, banks can contribute to the activation of more investors. This will not be instantaneous and requires some stamina, but it will pay off for investors, the industry and the common good.
A last word
“Throughout history, finance has played an important role in propelling social change, advancing living standards and creating good. Today the perception of finance is hampered and often associated with the opposite.”
Another example comes from Merrill Lynch, which – noted the Bank of America in a 2017 statement – is enhancing one of its primary wealth planning tools, Wealth Outlook, to further support goal- based conversations with clients on the topic of impact investing. “Advisors use Wealth Outlook
Banks can, and must, work to create transparency in a sector that looks chaotic to newcomers. Banks need to educate both themselves and investors and include impact investing in their advisory processes. They need to create an offering that will advise their client investors how to approach their impact investing in the context of a broader investment and portfolio plan. Banks should enlighten investors, creating frameworks and overviews that make it easier to navigate the “impact jungle”.
On an encouraging note, a number of leading banks around the world are working with the GIIN as members of the Investor Council to keep the channels of dialogue open regarding how to make impact investing more accessible to investors. These conversations must continue.
.
Absa Investment Publication
Gradient Issue 1
5
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76
