This week we were were seriously impressed by a campaign for the newest product line of Adidas Australia in collaboration with marine organisation Parley for the Oceans. Not only are we excited by the product – shoes produced using plastic ocean debris – but also the way Adidas launched it (as you know, I’m a marketer at heart!).

Adidas drained one of Sydney’s most iconic ocean pools, Icebergs on Bondi beach, and turned it into a tennis court – right before the Australian Open where the recycled plastic range made its debut on the courts. You can watch the video below.

“Every year more 8 million tonnes of plastic waste ends up in our oceans. We’re protecting the air that we breathe by taking waste pollution and turning it into something with a new purpose…”

Adidas is one of the many brands vowing to end their use of plastic and pushing messages around sustainability. Last year, it announced plans to only use recycled materials in its shoes and clothing by 2024.

This approach has not only improved the company’s risk profile from both an environmental and social perspective, but it has given Adidas more pricing power with consumers who value environmentally conscious brands. This type of product innovation and brand positioning is particularly important for millennial consumers, given that research shows they are willing to pay more for sustainability-oriented products.

With ESG investing taking centre stage, are we likely to see more global brands vow to put sustainability first? Without a doubt. And just like Adidas, it is likely to have a massive impact on the way consumers view the associated brands, the ‘longevity’ of these businesses and the investment opportunity they represent.

Growth in impact investing

In the words of our friends at EQ Investors:

Impact investing is an exciting and rapidly growing industry, powered by investors who are determined to generate social and environmental impact as well as financial returns.

How does it differ from ESG investing?

An ESG framework is a valuable tool that can be used to evaluate how certain behaviours negatively affect a company’s performance, and subsequently drive investing decisions. Most fund managers have now integrated ESG into their mainstream investment process.

Impact Investing takes an active approach to generating positive impact by investing in companies whose products and services have a positive impact, rather than simply avoiding those with a negative impact. Impact investing also adds another element: the ability to measure the effect of the investment.

I recently heard a firm list the following three necessary conditions for impact investing:

»  Intentionality – Clearly articulated objectives at the outset, pertaining to both social and financial objectives.

»  Measurement – A tangible commitment to track performance across social and financial metrics.

»  Transparency – A belief in information-sharing and insight into decision making, particularly as it relates to reporting out against expectations

Why does this matter?

As you may be aware, pension trustees must now consider ESG factors. Following a consultation, the Department for Work and Pensions, has mandated that trustees explain how ESG and ethical issues factor into investment decisions.

According to Simon Howard, Chief Executive of the UK Sustainable Investment and Finance Association (UKSIF, pronounced ‘Uck-sif’), it’s only a matter of time before financial advisers will be required to follow suit with their Centralised Investment Propositions.

Just how big is the market?

According to last year’s annual member survey from the Global Impact Investing Network (GIIN), respondents collectively manage over $228 billion in impact investing assets, a figure which serves as the latest best-available ‘floor’ for the size of the impact investing market. In 2017, this figure stood at $114 billion.

Do investors have to sacrifice returns to make an impact?

It’s a common misconception that investors have to give up financial returns to make a positive impact. A benchmark study published by Cambridge Associates found that impact investing can capitalise on long-term social or environmental trends and is able to compete with, and at times outperform, traditional investment strategies.

Indeed, impact investing favours companies that are trying to do good and run their businesses in a sustainable manner. Such companies avoid fines and other penalties; they have stronger relationships with their customers, suppliers and employees. Furthermore, they tend to operate in emerging sectors with high growth potential.

Is now the time to consider impact investing for your clients?

Watch the video (it’s pretty cool!)

 


This article was created for the DISCUS with reference to the Impact Investing services at EQ Investors. You can find out more about EQ Investors and their discretionary investment services here ›