- Financial Advisers confused about impact investing’s role in portfolio
- Public equity markets hold key to catalysing impact investing at scale
- FCA’s SDR Sustainability Impact label challenge for many public market equity funds
WHEB Asset Management, in partnership with the Impact Investing Institute and Friends Provident Foundation, in late April hosted a workshop for leading asset managers under the banner: Delivering Impact in Public Markets. The event provided for an open and transparent exploration of how impact investing can be scaled up via public markets.
Impact investments are, of course, investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return. Currently, the majority of impact investing is done in the private markets, through institutions such as family offices and foundations. However, private markets account for just 7.8% of the global total of assets under management1.
Seb Beloe, Partner – Head of Research, WHEB Asset Management, said:
“The volume of capital in the public markets – through publicly-traded equities, for example – poses significant opportunity to turbo-charge impact investing to the benefit of investors and the planet.
“We were heartened at the depth of thoughtful consideration all participants brought to this event, and reassured by the clear commitment to impact investing from our peers. Our single-equity, impact investment strategy has been operating for 25 years, and our hope is that impact investing in public markets becomes one of the great areas of investment growth in the years ahead.”
The event brought together leading public market investors to share their experience and ideas for advancing good impact investment practice. Participants included Aviva Investors, Cazenove, Columbia Threadneedle, EQ Investors, M&G, Montanaro, Regnan, Schroders, Snowball, Tribe Impact Capital, and Wellington Management.
Bella Landymore, Policy and Strategy Director, Impact Investing Institute, said:
“Our recent workshop on delivering impact through public markets, in partnership with WHEB Asset Management and Friends Provident Foundation, provided thoughtful insights and practical examples – under the Chatham House Rule - which left participants greatly inspired and energised about mobilising capital at scale to meet global challenges and serve investors.”
Key Findings
Besides recent market headwinds against sustainable investment strategies in general, the event found that that asset managers also encounter specific problems when they develop public market impact investment strategies.
View the full findings: https://www.impactinvest.org.uk/wp-content/uploads/2024/05/Briefing-public-markets-roundtable-April-2024.pdf
For example, there remains some debate over what counts as “good” impact investment in public markets. There is still a widespread lack of knowledge in mainstream finance and among financial advisers about impact investing in public markets, including confusion about its role in a portfolio and where it can fit, and its unique benefits – e.g. in terms of diversification and scale.
The FCA’s new Sustainability Impact Label, introduced under SDR, was flagged as challenging to implement. This label is for funds that mainly invest in solutions to sustainability problems with an aim to achieve a positive impact for people or the planet. In the first year of implementation this label is expected to have the lowest adoption rate of the four — 11% of the labels, according to Morningstar. This may reflect that the Sustainability Impact label is in many respects the most challenging to implement. Nonetheless, appetite for impact investing remains very high. For example, of all of the labels ‘sustainability impact’ was most positively received according to consumer research commissioned by the FCA2.
1 https://www.ubp.com/files/live/sites/ubp/files/White%20Paper_Impact%20in%20public%20equities_June2020.pdf?pdf=White%20Paper_Impact%20in%20public%20equities_June2020
2 https://www.fca.org.uk/publication/external-research/sdr-investment-labels-regime-qualitative-research.pdf
