14th October 2021, London
The popularity of ESG, sustainable and impact investing has been increasing over the last decade or more. But it is the rate of growth, particularly in the impact space, that has risen dramatically in the last few years.
In Europe, impact funds accounted for c.1% of all investment funds, worth approximately €105bn in 2020, as estimated by Morningstar[i]. However, in terms of net fund flows in 2020, the proportion is considerably greater. In 2020 alone, approximately 5% of all European net fund flows were into impact funds, representing c.€21.5bn, according to Morningstar research.[ii]
The result is an increasing number of impact funds being launched, which is causing concerns about a weakening of standards. In the 2020 Annual Impact Investor Survey[iii], for example, respondents identified ‘impact washing’ as the greatest challenge facing the market. Some commentators have gone further, suggesting that impact investing in listed equities is a contradiction in terms.
We have also seen the beginnings of an ‘ESG backlash’ over the past few months. Former BlackRock Sustainable Investing CIO, Tariq Fancy, published an essay calling ESG a ‘dangerous distraction’ from reality, and the SEC are investigating DWS’s sustainability claims after greenwashing concerns.
With so much noise in the sector, as well as ‘impact washing’, transparency and authenticity have become more important than ever. The differentiation between investment products is also becoming increasingly challenging. Against this backdrop, one solution to mitigate these challenges is providing better clarity over each asset manager’s approach to impact investing.
It is in this context that WHEB is publishing a new White Paper: “Impact investing in listed equities – WHEB’s perspective”.
The philosophy behind WHEB’s Sustainability strategy was created in 2005 with a focus on positive impact enterprises and we have built on our experience since then. But the world has changed dramatically as well as the investment industry. So, we want to clarify our view on what impact investing in listed equities means to us.
The paper explores the usefulness of ‘additionality’ in public markets, the importance of scale if impact investing is to enable positive change at a global level, as well as the significance of ‘intentionality’.
We believe that it is self-evident that all assets and all investors have impact. This impact can be positive or it can be negative, or more often a messy combination of both. The paper builds on the work of others[iv] and sets out the logic and narrative that underpins WHEB’s approach to impact investing and presents a model for how we deliver impact.
To download: “Impact investing in listed equities – WHEB’s perspective”, please click here.
Seb Beloe, Partner and Head of Research at WHEB, wrote the report and has put together a short video explaining the aim of the paper, which is available here.
[i] European sustainable investment funds study 2021, Alfi, zeb, Morningstar, 15 June 2021 https://zeb-consulting.com/en-DE/press/european-sustainable-investment-funds-study-2021
[iv] We have drawn inspiration in particular from the work on impact investing in listed equities by the Impact Management Project and the Global Impact Investing Network.