The momentum behind impact investing is palpable. As environmental, social and governance (ESG) integration becomes standard, investors are looking to impact investing practices as a next step to driving positive impact.
In 2022, the global impact investing market topped USD 1 tn for the first time, according to the Global Impact Investing Network (GIIN). The figure did not go unnoticed, attracting more asset managers, and increasingly asset owners, into the impact investing community.
Read our key takeaways from one of the leading impact investing conferences:
- Impact Measurement Drives Value
Spending time to understand and measure impact across an investment portfolio brings a breadth of insights to inform investment strategy and decisions. Toronto’s real estate developer TAS has nurtured its engagement with customers, suppliers and local communities by tracking a robust list of metrics across stakeholder groups and impact objectives. We heard similar stories about how impact measurement and management are increasingly driving value and returns.
- Towards Impact Measurement & Management (IM&M) Shared Practices
Breaking silos is imperative to move from defining impact metrics and methodologies to comprehensive impact management. The community is still finding common ground on IM&M practices, and there needs to be flexibility and cooperation between LPs and GPs, as well as alignment between GPs and portfolio investments on goals, shared learnings and best practices. This will also be key to activating the 71% of global institutional investors looking to move into the impact space in the next three years.
- Assets Owners Can Lead the Way
Assets owners are typically long-term investors, which often aligns with impact investing practices, and makes them perfect candidates to lead the way. The Dutch pension fund PGGM, a pioneer in the institutional impact investing space, said that it has already reached its 2025 target of achieving 20% of investments classified as sustainable development investments. Its next step is to build an investment process that embeds impact considerations into the very start for evaluating a new investment opportunity. In North America, asset owners are catching up: Quebec pension plan Fondaction is creating its own platform to drive institutional capital toward assets generating positive environmental, social and financial positive outcomes.
- Data Quality Is Paramount
Access to quality impact data continues to be one of the biggest challenges across the industry. Some of the key issues include identifying who collects, funds and benefits from data collection: Does it come top down from investor mandates or bottom up from portfolio companies? As an example, French multinational insurance company AXA has been using carbon credit rating platform Mombak to track information on the impact of their investments in reforestation projects in Brazil. This goes to show that engaging with stakeholders across industries and levels is necessary to collect quality data that can demonstrate concrete results.
- Embracing Collaboration Across all Spectrums
Collaborative projects, including research partnerships and blended finance, can increase value for various stakeholders, including communities most in need, non-profits and investors. For instance, UK social impact investor Big Society Capital partnered with the Joseph Rowntree Foundation to identify investable solutions and engagement opportunities for its Fair By Design fund that seeks to address the poverty premium paid by low-income households. Blended finance, which aims to mobilize public and philanthropic funds to support sustainable development, can also help derisk investments in underserved areas. Among the highlighted initiatives, Canada’s Convergence Blended Finance initiative aims to address gaps in the Sustainable Development Goals implementation.
To accelerate this transformation in capital markets, it [only] takes a few simple steps: “Disclose, learn, benchmark, rethink,” said Dimple Sahni, Managing Director of Impact Funds at Anthose.
Quinn+Partners advises leading assets managers and owners on their impact investing efforts by assessing this fast-evolving landscape, establishing actionable strategies and building IM&M programs.
If you are interested in learning more or developing your impact investing approach, please reach out.