Over the past 25 years I’ve worked to align investing with purpose. I’ve always found it incredibly valuable to share ideas with other impact advocates to learn what challenges they face and how they tackle them. To that end, I was pleased to join Raj Shant, Portfolio Manager at Newton Asset Management, and Alex Bernhardt, Principal and Leader of Responsible Investing at Mercer, for a recent Roundtable Discussion in Pensions & Investments (Tackling the Challenges of ESG Investing as Opportunities Expand Across Asset Classes).
Reflecting back on this discussion concerning the evolution of ESG and impact investing, a few observations stand out about current trends in impact investing.
First, as asset owners consider adding impact investments to their portfolios, they must decide whether to treat these investments as a separate asset class or as one additional investment criteria to be considered across all asset classes. Traditionally, most impact investing opportunities came in the form of equity, but recently, purpose-driven investment opportunities can increasingly be found in fixed income. As options for impact investments grow, this suggests thinking about it across all asset classes. Long-term investors seeking to match long-dated liabilities are finding opportunities in impact investing, such as IMPACT’s long-duration income strategies tied to affordable housing. These strategies are intended to help them meet return targets and lower portfolio volatility while making a difference in underserved communities along the way. [More on this here: Why IMPACT May Offer Stability In An Institution's Fixed-Income Portfolio]
Second, a new generation of investors are taking a more holistic approach to investing. They tend to be values-driven and want their investments to align in whole or in part with those values. A tremendous amount of wealth will be shifting among generations in the next five decades. This alignment between values and investing is causing more asset owners and managers to consider environmental, social and governance factors in their investments and with whom they do business. Diligence on impact becomes another tool in the evaluation process.
Finally, I am excited to see more asset owners pushing back against short-term earnings reports in favor of the long view. Companies in general should consider the impact of their decisions on the long term, not just on next quarter’s earnings. Similarly, asset owners should consider the long term implications of their investment decisions and how these investments will impact the world in which their customers, employees, retirees and other beneficiaries will live 20 or 30 years from now.
If you haven’t taken a moment yet to read the Roundtable, I hope you will and if you are inclined, I hope you share your thoughts and ideas. To learn more about IMPACT and our impact investing platform contact us at info@impactcapital.net.
Disclaimer: This post is not an offering document for any securities. It is also not an offer of, or an agreement to provide, advisory services directly to any recipient. The information presented is intended to describe certain views of the author and Impact Community Capital LLC. The information presented in this post may contain statements of opinion, forward- looking statements and relies on certain assumptions. Any such opinions, forward-looking statements and assumptions may be inaccurate, and there can be no assurances that the examples included herein will reflect actual investment outcomes. Neither the author nor Impact Community Capital LLC intends or assumes any obligation to update or revise these opinions, forward-looking statements and assumptions in light of developments which differ from those anticipated. Past performance may not be indicative of future results and there can be no guarantee as to the return or volatility of any particular impact investment or set of impact investments. All investments carry a risk of loss that investors should be willing and able to bear. Use of this document is subject to the terms and conditions set forth on Impact Community Capital LLC’s website and can be accessed at http://impactcapital.net/about....