Impact investing, which targets both financial returns and positive social or environmental goals, is reshaping the way some investors make their portfolio decisions. But both the growth in assets invested, and the impact that investors want to achieve through their impact investments, have arguably yet to reach their true potential.
Part One of our series introduced the concept of impact investing and highlighted why an organisation must clearly define the measurable impacts it intends to target. In Part Two we explored the terminology of impact investing, the role of the UN Sustainable Development Goals, and considered some of the opportunities in the space.
In Part Three, we delve deeper into the practical considerations of impact investing such as how investors can address scale issues while also contributing to the bigger sustainability picture. We then highlight the importance of managing ESG risks in impact investing.
This paper delves into:
- Impact alignment versus breadth of opportunities
- Taking a wider lens to impact investing which can provide greater scale and access to opportunities
- A look at some new impact investing products on offer
- Do impact investment funds automatically tick the ESG box?
Ultimately, as the market for impact investment continues to evolve, opportunities for investors and service providers grow. However, to address the world’s most pressing social and environmental issues, further scale in impact investing is required.
Investors, fund managers, and consultants can and should work together to create a more sustainable and meaningful impact investing ecosystem. This may involve investors applying a wider lens to their impact goals, even as they define, and own, their intentionality. Frontier believes there are a range of positive benefits for investors and the wider market to be gained from participants looking beyond their immediate circumstances. These include a larger investment universe and a more economically scalable impact program. The examples we have highlighted in the paper are attractive options in this regard.
Want to learn more?
Understanding and assessing this area requires significant effort and expertise. As an asset consulting firm advising many asset owners, we have been able to deploy time and resources to complete that work, and we continue our efforts.
Frontier can support you in establishing an impact investing program, including by creating a robust governance framework and identifying suitable investment opportunities. Our dedicated teams in governance, responsible investment, and research are ready to assist and help you leverage our expertise and experience.
For more details, please reach out to you consultant or contact Frontier’s Responsible Investment Team.
