Monday, June 27

Impact investment funds: beyond posturing | Business


Screens with stock information on the Madrid stock market.
Screens with stock information on the Madrid stock market.Ana Bornay / EFE

Neither philanthropy, nor altruism, nor any renunciation of obtaining profitability. Nor is it only the application of environmental, social and corporate governance (ESG) criteria when selecting investments. Impact investing is one more step forward. According to the Global Impact Investing Network (GIIN), it is indeed an investment strategy focused on companies that seek to cause a positive impact in the economic, social and environmental field, as happens with Socially Responsible Investment (SRI). However, just looking for those goals is not enough. In impact investing there have to be quantifiable, measurable results. They must leave their mark and must be made known regularly through the corresponding reports. Of course, impact investing aims to be profitable, like any other. In fact, so far, and with the figures provided by the index creator MSCI in its risk-return study of the SRI versus conventional indices, the result is positive. As of June 30, 2021 (latest data available), the annualized return, for example, of MSCI Europe is 12.5% ​​over three years compared to 8.71% of traditional MSCI; at 5 years, the MSCI World SRI offers a profit of 17.07%; the conventional MSCI, 15.44%. For the part of risk that the investor assumes, the numbers say that both at 3, 5 and 10 years, volatility is lower in any of the MSCI SRIs (Europe, World, USA or Emerging Markets) than in the traditional ones.

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Impact investing is still starting to take off. According to Randeep Somel, M & G’s impact investment manager, GIIN data says that more than 715 trillion dollars (about 600,000 million euros) already move in this market segment, still mostly invested in private debt and venture capital. . In his opinion, its development has only just begun, although since 2015, it has registered annual growth rates of around 17%. “It is true that impact investing in listed shares is still something relatively new, but it will grow because more and more investors or regulation itself are pushing investment firms more strongly. to do the right thing. It will become more and more common and this should help improve the image of capitalism, as well as the health of our planet. For our part, we already have more than 140 companies in our sights and we are seeing significant capital flows arrive, ”he assures.

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Last March, the Sustainable Finance Disclosure Regulation of the European Commission (SFDR) came into force. It makes clear the difference between investment with ESG criteria and that of impact for companies, managers, credit institutions, financial advisors.… The so-called “products of article 8” are adapted to the first type; to the second, the “Products of Article 9”. Impact investment funds are in the latter and, “the offer is still scarce,” explains Sebastien Senegas, head of Edmond de Rothschild AM for Spain and Italy. For this expert, “little by little they will gain ground. Not only are there good business opportunities but also this form of investment, in which the results are seen in the social, the environmental … is necessary ”. From his point of view, in 5-10 years “we will hardly even talk about this. The entire financial industry will be ESG and a good part of it, as well as impact. Capital flows towards this type of investment are increasing; the companies are convinced and for all the profitability increases in the medium and long term ”.

For Álvaro Antón Luna, country head from Aberdeen Standard Investments, “We are the 1st and last generation that can change the world for the better. We are the first to be aware of their economic, environmental, organizational problems … and the last to be able to solve them ”. In his view, the road ahead for impact investing that seeks concrete results is still long. “We know that the transition will be slow, but if it is not done there will be no future,” he emphasizes. He acknowledges that there are still few democratic investment funds (within the reach of the private investor) that exist but, in his opinion, there will be more and more. “We already contemplate an investment universe of approximately 400 companies. It is true that it is less than what is contemplated in a global investment and that themes can be lost but in return you gain protection and, of course, you do not necessarily lose profitability in the medium and long term ”.

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At Triodos Bank they wanted to take a step forward with regard to impact investing. According to Cristina Martínez, Investment and Savings Products Manager of this entity, “we have been working for 40 years from the point of view of ethical banking and today we maintain this vision, which has led us to launch a distribution platform of, for the moment 12 impact investment funds, of which nine are based precisely on article 9 of the European Commission’s Sustainable Finance Disclosure Regulations and another 3, are pending approval in their country of origin ”. According to Cristina Martínez, they belong to three different management companies, they are fixed or variable income (to facilitate diversification) and no subscription or redemption fees are charged, nor minimum entry fees are required. “Regarding its management commissions, he assures, they are in the average, 1.75% the most expensive, which we do not believe drains profitability”.

When asked whether impact investing will be just another one of the many fads in the investment world, all the experts consulted strongly reject the idea. For Martínez, “a demonstration that this is not the case is that the turnover ratio of impact investment portfolios is very low. The engagement with the companies that really work for a better world is very high ”.


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