SPR Webinar: Impact Investing
Thursday 20 July 2023
Making a difference

Charlotte O'Leary of Pensions for Purpose introduced the idea of impact investment, noting that this is taking hold among investors as they place greater emphasis on ESG considerations. In particular, she stressed that impact investing is not philanthropy: achieving impact doesn’t equate to lower risk adjusted returns, but does need to encompass ‘double materiality’ – i.e. companies reporting on their impact on the world alongside financial information.

Shuen Chan, LGIM Real Assets emphasised that impact investing has many different interpretations.  Her organisation espouses the concept of ‘place-based social impact,’ which they see as having four strands: community in the widest sense, not just the occupiers of the real estate portfolio; commercial, aligning with an organisation’s commercial objectives; collaboration, developing a strategy with local partners; and catalytic, intentionally facilitating positive outcomes.  Inclusion, health & wellbeing, and climate & nature are viewed as the three dimensions across which these strands are implemented.  She explained that LGIM applies these objectives to all assets, some of which may be more amenable due to their function and location than others.

Amy Ingham from The Good Economy reinforced the message that ‘no size fits all’, particularly when it comes to measuring social impact, which is a key part of her work with investors.  She suggested that measurement is critical in managing and maximising impact, and more specifically to demonstrate intentionality, avoid negative impacts, tackle greenwashing and evidence additionality – that is, to show that the impact goes beyond what would ordinarily have been the outcome of investment.  There is a tendency for many investors to focus on their activities rather than the outcomes, she proposed.  The KPIs an investor sets to measure impact should take in the baseline position – what needs is the strategy aiming to meet at the outset?

In the panel discussion that followed, which was chaired by Melville Rodrigues, Apex Group & AREF, it was suggested that environmental and social objectives can sometimes clash, even if both are seen as desirable in the long run.  This is one reason why it is important to work with the local community, to build an understanding of the trade-offs that may be necessary.

Answering an audience question, Ingham agreed that standardising impact goals and their measurement is an important objective, but that there is a long way to go.  Part of the reason is that impact needs to be relevant locally, and KPIs have to be set with this in mind.  An ‘alphabet soup of acronyms’ has grown up, Chan suggested, reflecting the plethora of bodies and regulations that can add complexity to implementing impact investing.

Another question asked if there could sometimes be a problem with investors’ values conflicting with those of the community. Chan noted that property relationships can sometimes seem ‘feudal’, something that can be helped by using more sensitive language, for example.  O’Leary proposed that embracing social impact needs to go right up to the C-Suite, otherwise the organisation may be seen as still mainly profit-driven in its motivation, due to activities that might be happening in other parts of the business.

Improving data availability is another important area in the context of impact investing.  Amy recommended the public available economic and demographic data, such as ONS, to understand the local community. Chan suggested that publicly available standardised information such as that contained in the Thriving Places Index can help set the baseline for impact measurement by providing an assessment across different qualities.   But, as O’Leary said, funds and their investors need to be cognisant of differing incentive structures and time horizons.

Tim Horsey