Last week I attended the EQ investors seminar on impact investing which coincided with Good Money Week. The seminar focused on socially responsible impact investing and how this can address major social and environmental challenges while generating returns.

Delegates were treated to presentations from Damien Lardoux (portfolio manager at EQ) and then Simon Bond of Columbia Threadneedle investments and Hamish Chamberlayne of Janus Henderson.

Key learns were:

» Ethical investing is not social impact investing

» There is a growing interest from clients

» EQ invest in 4 key themes

» How impact is measured

» Clients can choose impact investing and still have performance

 

Ethical investing is not social impact investing

Ethical investing has generally been the use of negative screening to exclude sectors or companies in which clients do not wish to invest. These are often controversial sectors such as tobacco, animal testing, gambling or armaments.

However, impact investing focuses on the positive inclusion of companies developing products and services which are having a positive impact in society or the environment. Typically, such companies tend to avoid fines and other penalties and have stronger relationships with their customers, suppliers and staff. They also often operate in sectors with high growth potential.

Growing interest

Investors in ethical investments is limited but the investor base for Impact investing is wider and growing and is most popular particularly amongst the younger generation. Research in 2015[1] indicates that 43% of millennials are interested in social impact investments and 17% currently own some social impact investments.

4 Key Themes

EQ investors focus on the following key themes:

» Climate change

» Health

» Natural resources

» Inequality

The following table looks at this in more detail

 

 

How impact is measured

The United Nations have developed a framework against which the impact of portfolios can be measured. This consists of 17 sustainable development goals covering areas such as

  • No poverty
  • Zero hunger
  • Quality education
  • Clean water and sanitation
  • Reduced inequalities
  • Affordable and clean energy

EQ investors use this framework and map their portfolios against this to measure impact and can demonstrate how their portfolios map against each of these goals. Customers can therefore be reassured that their investments are truly invested in companies which have a positive impact in society.

 

Client can choose impact investing and have performance

A common myth of both ethical investing and impact investing is that there is a trade off with performance. If that’s true, then some people might be happy to be reassured that their investments  will have a positive and lasting impact on society but the good news is that this doesn’t have to be at the expense of investment performance.

The positive impact portfolios managed by EQ Investors have demonstrated a 5 year growth track record when compared against the ARC Balanced benchmark.

 

In summary, impact investing is a growing investment opportunity which can also deliver performance for clients and a positive contribution to society.

You can access more information about EQ Investors and their portfolios here.

What are your views on impact investing? Please feel free to leave a comment below.

References

[1] US Trust Bank of America Private Wealth Management, Insights in Wealth and Work Survey 2015

 


This article was created by DISCUS based on the recent seminar hosted by EQ Investors. You can find out more about EQ Investors and their discretionary investment services here ›