October 2021

Posted by Anton Murray Consulting on . Posted in 2021

Impact investing is not new but has gained much wider appeal in today’s investment landscape, especially since the pandemic. Impact investing is not philanthropy as it aims to generate positive returns for those taking part. Simply put, an impact investment looks to make a positive contribution to the area in which it invests, be that the betterment of the environment or a social issue. The Responsible Investment Association of Australasia notes that the three parameters of impact investment are intentionality of the investment to produce social or environmental outcomes; the measurability of those outcomes and financial returns.

The growth of ESG investment parameters have brought the idea of investing for good into the forefront at both institutional and retail levels. Many listed public companies and fund managers have built ESG frameworks into their businesses to reduce or mitigate negative impact in the areas they operate and invest. Impact investing seeks to find companies and projects that make positive contributions through their implementation.

Impact investing is growing in a number of areas like investment managers who build portfolios of listed equities with their own stock or thematic filter to find and back companies making a positive impact in their industry. The intent of these portfolios is to go beyond stocks that are ‘greenwashed’ or who have taken on ESG themes. Whilst this is positive in itself, impact asset managers are looking to buy stocks that have direct exposure to industries or ideas where a measurable positive environmental or social impact can be attributed. The stock universe for this type of product is growing, particularly with new technology in renewable energy, pharmaceuticals, and waste recycling. Other products such as social or environmental impact bonds can also be managed by investment managers looking for different asset classes or diversity in their portfolio offerings.

Another way investors can gain exposure to impact is through direct investments in infrastructure and other such projects that create positive outcomes for communities, nations or the environment. These investments can be wide ranging in their desired impact or extremely specific in the areas on which they focus. Renewable energy, medical and hospital infrastructure, housing and water sustainability are just a few. Even real assets such as forestry investments (which are certainly not new to institutional investors) can sit in this arena.

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