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39


Big Society Capital floated its Social Impact


Trust on the stock market in late 2020, which is ‘targeting a decent commercial risk-adjusted return’, says Muers. Data firm Morningstar shows that the performance of ESG and impact-labelled products has been ‘as good or possibly slightly better than conventional products’ across a 10-year period. Furthermore, these sectors tend to be immature, with plenty of headroom for growth. ‘We get excited about investing in cloud businesses because they’re 50 per cent penetrated, or payments businesses because they’re 40 per cent penetrated,’ says Davis. ‘But when you think about electric vehicles or renewables, it’s 20 per cent or single digits.’ The pandemic has also propelled the rise of impact investing, revealing imbalances in society and providing motivation to address them. Last year, the Harvard Business Review published a report with a less rosy outlook.


Titled Impact Investing Won’t Save Capitalism, the report asserts that impact investing alone does not have the capability to raise the $2.5 trillion a year of additional private investment needed to meet the UN SDGs by 2030. What is needed, it says, ‘is reform of the rules that govern how our economy works’. While some carbon-cutting initiatives fall


below the ‘zero-cost line’ (they make money), most do not. The report asserts that the UN SDGs will not be met unless ‘above the line’ initiatives – things like expanding wind energy to unprofitable sites or using carbon capture and storage – get more funding. However, with current technology, these initiatives would only be made competitive on cost with the introduction of subsidies or carbon pricing. Impact investing is not a silver bullet, says


Davis. ‘We need at least $2 trillion invested annually in clean energy systems to have a chance of staying below 2°C of global warming. That can’t be [just] government subsidy, and


it can’t [just] be philanthropy. We need policy that provides clear signposts and pricing, and then let’s let the markets get to work. I don’t think we’ll get there otherwise.’ Rennie Hoare, partner and head of philanthropy at C Hoare & Co, agrees, anticipating a point in time where retail investors can invest in impact funds on a far greater scale. ‘The big prize,’ he says, ‘is not philanthropic capital – it’s mainstream markets.’ Perhaps the answer is for impact investing


to be regarded not as a discrete activity or asset class, but as an approach that more people, organisations, and governments need to adopt. That could turn the G8 taskforce’s prediction – of a three-pronged 21st-century investment paradigm based on return, risk and impact – into reality. But it would require deep and far-reaching change. ‘We’ve created a one-dimensional highway to hell,’ says Tribe CIO Fred Kooij. ‘And in order to get off that, we have to recode everything.’ S


The green team


TRIBE IMPACT CAPITAL is not your traditional wealth manager. You won’t find it in oil or gas, and financials don’t fit its investment style either. The majority of its capital is in liquid portfolios, equity funds and credit funds, which are filled with things like renewable energy and cleantech. Tribe rarely invests in the private unlisted space. Most of its clients are female and under the age of 45. The company is a dedicated impact investor. In fact, it claims to be the first wealth manager in the UK where 100 per cent of AuM is managed with the aim of delivering on the UN Sustainable Development Goals. Every company that it invests in contributes either directly or indirectly to the achievement of one of the 17 global goals, which range from eliminating poverty to achieving affordable and clean energy for all. The firm also practices what it preaches: Tribe is a B Corporation and has signed up to external commitments including a net-zero 2025 timetable, as well as the Treasury’s Women in Finance Charter. It all started in 2015, when current chief impact officer Amy Clarke was introduced to chairman David Scott. The meeting brought about a confluence of traditional investing and sustainability expertise, which has been the foundation of the firm. ‘We wanted to create a destination for wealth holders who want to reflect their true, authentic selves in their wealth, but also to tackle the investment paradigm at large,’ Clarke tells Spear’s. After being joined by a third co-founder, James Lawson (a fourth, Eric Catchpole, would join later), the group took its concept to the Financial Conduct Authority (FCA). The FCA fast-tracked Tribe to authorisation; it ‘got its wings’ in late 2016. In the four years since, Tribe has been a disruptor in a largely static industry. ‘It’s been a very dry and boring story – in some ways deliberately so, it’s steeped in jargon to prevent engagement,’ says Fred Kooij, Tribe’s chief investment officer. Tribe takes new clients through a process called ‘Impact DNA’; the


Tribe is the first wealth manager in the UK to manage all of its clients’ assets with the aim of supporting the UN Sustainable Development Goals


primary function of which is to allow the client to articulate the change that they want to see in the world. Tribe then builds each client a personal ‘ark’, ‘stuffed full of all of the things that they really care about’. Reporting is also done differently, with the objective of allowing clients to follow the ‘stories’ of their wealth. In an annual review, clients are provided with an ‘impact dashboard’. This allows them to see the key environmental, social and economic metrics that have been flagged for their portfolio and how each has performed. ‘The whole process acts as a reminder that whenever you’re investing, you actually have an impact,’ says Clarke. ‘There’s responsibility that comes with that capital.’ But this isn’t just about doing the ‘right thing’. The firm has generated impressive returns. Its medium risk portfolio ended 2020 up 18.6 per cent, a 13.3 per cent outperformance relative to the ARC Index. Since November 2016, the portfolio has doubled the ARC benchmark, achieving a 43.1 per cent return over four years.


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