Can impact investors strike a balance between positive change in society and generating returns?

20 July 2020 – As the impact investing market continues to grow a new whitepaper on Impact Investing from CAMRADATA, considers how investors can strike the balance between making positive change in society, whilst generating positive returns for their clients in the future.

The whitepaper includes expert insight from guests who attended a CAMRADATA virtual roundtable in June. Participants included Kempen Capital Management, M&G Investments, Aon, Barclays Wealth, Lane Clark & Peacock, Pensions for Purpose, Redington and XPS Pensions Group.

A new 2020 survey by the Global Impact Investing Network[i] indicates that the $715 billion global impact investing market is maturing, driven by strong performance and better measurement. 57% of respondents said that despite uncertainties caused by the COVID-19 crisis, they are unlikely to change how much capital they will commit to impact investments this year.

Sean Thompson, Managing Director, CAMRADATA said, “As we reach the halfway point of this turbulent year due, fund managers are still coming to terms with where we are now, what tomorrow could bring, and how to thrive in these extraordinary times of uncertainty.

“Looking beyond the Covid-19 crisis and all the heartache it has wrought, there may be an opportunity to implement positive change in society – in the economic, sustainable and social sense – and impact investments can play a part in this.

“Although impact remains in the shadow of other forms of responsible investing such as ESG Integration and Screening, for many, impact investing is where the world is headed. Our panel considered the future and how responsible investors will purposefully want to invest – to do good and be part of the solution.”

Key discussion points included where the market is heading, how capital gets deployed to earn market-like returns, the issue of measurement and one of the biggest talking-points for investors today, where ESG investing stops and impact investing starts.

The panel also considered the lack of scale and the lack of fixed income products and how investors can get more bang for their buck in private markets.  The conversation ended by looking at the auditing of impact figures.

Key takeaway points were:

  • The CAMRADATA panel were asked if ESG investing and impact investing could be harmonised. The majority were sceptical, with one panellist very clear that they do not see them harmonising:

“ESG analysis should form part of an impact investment manager’s due diligence, but from the outset the concept of intentionality should distinguish an impact strategy from an ESG one.”

  • Another panellist views ESG and Impact Investing as focusing on similar sustainability issues, but while ESG investing focuses on how these issues affect the company, impact investing looks at things the other way around and measures how the company’s activities address the sustainability challenge.
  • Multi-asset is the most popular type of Impact fund, accounting for almost half the universe according to the Global Impact Investing Network. But the real issue is the size of that universe: fewer than 450 funds.
  • Whilst this universe might not be complete, the relatively small number helps explain why impact investing thus far has been peripheral to total ESG investing, let alone all securities markets.
  • Whilst the CAMRADATA panel broadly welcomed future developments around auditing impact figures, one panellist pointed out that the investment industry can worry too much about measurement. He said, “We have done behavioural finance studies with clients and the quality of impact measurement will not get them to invest more. From the perspective of asset owners, it is outcomes that they really care about. “

The whitepaper also features two articles from the sponsors offering valuable additional insight. These are:

  • Kempen: ‘The Quest for Impact Investing’
  • M&G Investments: ‘Now is the time for impact’

To download the Impact Investing white paper click here