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Impact investing: the future of active management?

 

Investing for good is a fast growing trend – and one worth exploring for any professional or private investor.

Many savers feel passionate about protecting the environment  - in particular, reducing the amount of plastic waste. But investing for good goes much further than simply backing companies that promise to improve or preserve the environment. 

Responsible investors pay particular attention to a company’s record on environmental, social, and governance (ESG) issues which can help measure just how responsible or sustainable a company is.

A recent study showed that more than half (55%) of investors say they would like their money to support companies that contribute to society and the environment. Impact investing, where investments are made with the aim of generating social and environmental impact alongside a financial return, is also on the rise. 

However, it’s not just investors that are keen to embrace this kind of investing. There’s support from the Government, the regulator and crucially, asset management companies.

The report, Impact Investing: An Industry View was compiled for the London Active Summit, and unveils the progress being made in this space. It explores how asset managers are increasingly focusing on providing more investment opportunities, taking ESG factors into consideration. The report highlights the wave of sustainable and impact fund launches in the last 12 months alone – adding to the existing ranges of funds the serve this sector. 

As well as running specific ESG funds, many asset management groups reveal that they are working to integrate ESG into their entire businesses - some are already doing it.

Fund managers and analysts are working hard to find companies that are committed to a sustainable future. 

These include household names such as Unilever, the consumer giant that is home to Marmite, Dove soap and Magnum ice cream. The firm has cut packaging waste per consumer by 28% since 2010. It has targeted at least 25% recycled plastic content in its packaging by 2025. This is just one example of countless companies all over the world which have announced plans to behave in a more responsible manner. 

Instead of seeking out these companies to add to an ISA or pension portfolio, investors can rely on a fund manager to undertake the search on their behalf. 

One issue that comes up time and time again in the report is the misconception that limiting the companies in which you can invest could hinder investment performance. 

As the report discusses, there is growing evidence that suggests that funds which adopt an ESG approach will see a boost in performance. 

Impact Investing: An Industry View includes a range of interviews with key industry figures about the growing demand for ESG and impact investing, why it’s important and the challenges faced. 

A View from the Top features an exclusive roundtable with Euan Munro, Chief Executive Officer of Aviva Investors, Peter Harrison, Group Chief Executive of Schroders and Richard Wilson, Chief Executive Officer of BMO Global Asset Management.

Leading independent investment experts including Richard Romer-Lee, managing director of Square Mile Investment Consulting & Research and Will Goodhart, chief executive of the CFA Society UK shed light on the challenges faced. 

The verdict by industry figureheads is that impact and ESG investing looks set to be the future.

As Jamie Jenkins, Head of Responsible Global Equities at BMO Global Asset Management told me: “Investing for good is not a nice-to-have in a portfolio - it’s a must-have.”

Holly Thomas


 

Impact Investing Report: An Industry View 2018 (Full report)

A special report created for the London Active Summit - 1st October 2018

 

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