1. Newsroom
  2. Impact investing - Shaping tomorrow
Menu
Insight 17.10.2018

Impact investing - Shaping tomorrow

Impact investing - Shaping tomorrow

Impact investing can help shape a healthier and brighter future.


Taking a sustainable approach to investment allows investors to combine ethical aspects with performance. The aim of impact investing is precisely to engage with companies that take on the challenge of solving some of the world’s most pressing environmental and societal problems, while at the same time offering investors attractive and stable long-term returns.

Does impact investing means I have to compromise on financial returns?

mesurement.jpg

A cornerstone of impact investment is the measurement of non-financial performance alongside financial returns.

performance.jpg

This allows the end investor to have a much more complete picture of the performance of their holdings.

KPIs.jpg

For example, in addition to traditionally reported metrics such as the share-price performance, tracking error and Sharpe ratio, an impact fund should disclose information on certain KPIs which illustrate the degree to which the fund is addressing the UN’s SDGs (or comparable goals).


Can I measure the impact of my investments alongside their financial performance?

trustdocument.jpg

One area of concern in the impact investment community is the comparability and availability of data. Until reporting requirements are enhanced, many third-party data providers are having to rely heavily on company disclosure.

unreliable.jpg

This can result in a combination of estimated and unreliable data. There are therefore no shortcuts to impact measurement.

meaningfulKPIs.jpg

A bank of relevant and meaningful KPIs can only be built up over time and with engagement.


The UN’s SDGs as a road map

  • The UN’s 17 Sustainable Development Goals were established in 2012 and aim to cover the key pillars of development, namely economic, social and environmental targets. All 193 UN members have adopted these goals and are working towards them. With such widespread take-up, the goals have become a de facto blueprint for the impact investment world. This is helpful in terms of defining and measuring the impact an investment can make, and, of course, ensuring it is aligned with the UN’s aims. The goals will require an estimated USD 5–7 trillion in annual investment and much of this needs to be funded through private investment. Finding and supporting the enablers of these goals and beneficiaries of this capex spend is a key tenet of impact investment.
  • However, as investors, we must exercise caution; not all of these targets are accessible through direct investment (this is particularly the case with listed securities) and there is great scope for “impact washing” from those corporates who wish to enhance their sustainability credentials. It is critical to the credibility of impact investing (and ultimately its effectiveness) that the intentionality of investments is thoroughly stress-tested.

The role of “engagement” in impact investing

  • Engagement refers to the communication between suppliers and consumers of capital. It enables investors to both understand (and in some cases shape) corporate strategy, and in the case of impact investing in particular, it can be a useful educational tool.
  • Engagement is critical and should be embedded in every stage of the investment process – from the initial investigation of an investment, to the impact measurement of a fund holding. A robust and honest bilateral relationship with companies is the most effective way to gain clarity on the true intentionality of a business. It also provides the necessary encouragement and support for them to deepen and broaden their measurement and disclosure of non-financial KPIs, which are relevant to the investor.
  • To further the effectiveness of impact investment and create broader top-down change, engagement should go beyond these bilateral relationships and include collaboration with industry peers, governmental organisations, academics and specialists.
UBP Responsible Investment

Funds

Positive Impact Equity

Discover our range offering

Our range offering
Head of Impact Investing

Victoria Leggett

Head of Responsible Investment for Asset Management. Victoria joined UBP in 2010 as a portfolio manager and has 15 years of investment experience. She previously worked as a European Equity Analyst at Threadneedle having started her career in Corporate Finance.

Contact us

Want to know more about responsible investment?

Get in touch with our experts

Send us an email
Senior Investment Specialist

Jean-Luc Eyssautier

Jean-Luc Eyssautier joined UBP in December 2012. Based in London he is UBP’s Senior Investment Specialist for our European equity strategies as well as being responsible for the distribution of UBP’s strategies in the UK.

Expertise

Impact investing - Creating the future now

The role of impact investing is to strive to solve the world’s most pressing problems by identifying compelling long-term investments.
Read more
Asset class

Japanese equities

Why the current outlook makes a compelling case for Japanese equities

Watch the videos

Most read

Insight 13.12.2018

UBP Investment Outlook 2019

Opportunities and Threats in a Desynchronised World

Insight 16.04.2019

A Fresh Look at Japanese Equities

Making the case for Japanese equities

Insight 09.01.2019

Emerging Market Fixed Income – 2019 Outlook

After a market sell-off in 2018, we believe that emerging market (EM) fixed income should perform better in 2019, thanks to sound fundamentals, reduced political risk and more favourable technicals and valuations.


Further reading

Insight 13.05.2019

Trump unconstrained

Spotlight - The Sunday night tweets from the US President not only introduced uncertainty into the ongoing US-China trade negotiations and prospects for future global growth, but should also serve as a reminder to investors of the new, more challenging risk environment facing them looking ahead.

Insight 06.05.2019

Initial thoughts on Trump’s new tariff threats

President Donald Trump has raised pressure on China to strike a trade deal by threatening a possible increase of tariff to 25% (from 10%) on $200bn worth of Chinese exports to US by Friday (May 10). He may also consider extending a new 25% duty on another $325bn worth of Chinese products.

Insight 16.04.2019

A Fresh Look at Japanese Equities

Making the case for Japanese equities