Impact investing – Roundtable
at our alignment to impact through reve- nue or investment in certain themes and that is where the EU taxonomy can help. Landymore: There is no one-size-fits-all way to measure an impact investment. There is no best example. There is no standardi- sation. It is a rapidly evolving area. Just do what you can. There are many options out there and every fund manager is going to do it differently.
The issue for the consultants and the end investors is translating that information into something that is comparable and understandable. The problem is the onus often lies with the end investor to make sense of that.
The only caution in picking one impact KPI is the risk of ignoring some of the negative impacts a portfolio might be hav- ing. Again, it is asking difficult questions about potential negative impacts, asking about the frameworks the fund manager is using and how they are improving the information they are providing you. There is a huge range of options and until there is a standardisation, the advice would just be: pick one. Manuel: What is the point of measure- ment? One is to support decision making. There is no shortcut to due dili- gence. Measurement frameworks bring more information and new lenses into the mosaic of infor- mation that goes into the due dil- igence process.
The other reason is engagement and com- munication. That is where some of the measurement frameworks can only solve part of the problem. We have found that the way members get engaged through those communications is more from the stories than the stats. Stats are a bit abstract, while case studies bring the situ- ation more to life. Obviously, in those stories there is a chal- lenge around cherry picking. It is impor- tant for trustees to choose the case studies they want to show rather than let them be dropped on them by managers where it is easy to find a good story in any portfolio.
Pinnock: People hiding behind measure- ment being the major issue is a stalling tactic. The likelihood is that an impact fund is probably going to deliver a better positive impact, if not the same, as a standard fund. So, take the plunge. MacArthur: In the lack of stand- ardisation and regional frame- works, I can see parallels with the ESG data debate from five years ago. We are seeing good incre- mental efforts coming out of mainstream data providers on impacts. There is lots of innovation from the start- ups, so maybe we will see a shakeout with more mainstream providers coming for- ward in the ESG data space in the next two or three years. To pick up on Tim’s point, there is a trade-off between com- plexity and accessibility, so professionals can get lost in a zoo of acronyms. I like the efforts some participants have made to bring in impact calculators, which could help make the connection between your money and how it is chang- ing in the world. That is the skill for con- sultants to navigate this zoo of acronyms but also translate it into actionable ideas that people can take forward.
Bella Landymore Policy director
Impact Investing Institute
PI: Are trustee attitudes towards this mar- ket improving? L’Estrange: They are, particularly over the past 18 months. Some of that has been driven by compliance and some by changes in the world.
A couple of years ago I was already pas- sionate about it, but I was concerned about having the answers before I was vocal and then I realised it was my job to ask the difficult questions. I have been doing that on my boards and a year on from giving them a grilling, they are com- ing back with thoughts and ideas. Just starting these conversations is powerful.
Occasionally, you get disappointing responses from consultants, but if we all jump on board, there is momentum here that could make a difference. Cusack: There is still some convincing to be done, but it is heading in the right
Aaron Pinnock
Impact investment analyst, The Church Commissioners for England
direction. People are not averse to having the conversation, whereas a few years ago they would have been. They recognise this is the direction of travel that they need to get familiar and comfortable with. There is still work to be done, but I am optimistic that it will move quickly and appropriately.
PI: How else is impact investing evolving? Manuel: Part of the challenge is getting the message out: that by doing this, you are not putting yourself out on a limb, it is fundamental to the delivery of fiduciary duty. To help the market evolve, trustees need to make it clear what they want and that it is a non-negotiable, absolute need to have. It is for all the participants in the market to come together to try and resolve it. The more we can demonstrate the strength and solidarity of that view from the decision makers or beneficiaries, the more hope we have to make that happen. MacArthur: We will see more sophisticated data come in overtime as well as more consolidation in the frameworks. L’Estrange: I love the enthusiasm and pro- activity amongst the people in this discussion.
It shows that the information is there, that the activity is there. We come up against a lot of excuses and we have high- lighted those myths today. So do not be afraid to seek out the people doing this and the information, which is available. The precedent is there. The business opportunity is the key.
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