Taken from the Good With Money Guide to Impact Investing, Damien Lardoux, head of impact investing at Good Egg company EQ Investors explains why, as many investors rush to do Good with their money, it is important to ensure a manager can back up their claims.
“Impact has become a popular term recently, with increasing numbers of people claiming to be making it: from fund and bank managers to Bono – there has never been so many seemingly making a good impression on the world. There are far less, however, who can point to their actions and say “this is EXACTLY how much good we’re doing.” (With the exception of Bono, perhaps, for whom no feat is likely too great).
In the investment industry especially, this is a big problem. Ten years on from the scandals of the global financial crisis, the money world still has a major PR issue and trust remains low, especially among younger, more environmentally and socially minded investors. And as the industry rushes to embrace impact to please this demographic, the danger is that it is just PR. Burned once, these savers and investors are unlikely to take kindly to being burned twice.
This is why we at EQ Investors launched our Positive Impact Portfolio reporting tools. From our online calculator to our in-depth annual impact reports, we lay out – in detail – exactly how investors in our range of Positive Impact Portfolios are helping both the environment and society.
The SDG roadmap
Like many other impact investors, our thematic investment process is mapped directly onto the UN’s set of 17 global Sustainable Development Goals. As keen readers may have already spotted, these are considered by many to be the gold standard for impact investors and have become one of the world’s most important sustainability frameworks since their introduction in 2015.
Number six of these goals is to ensure the availability and sustainable management of water and sanitation for all. As the UN identifies, access to clean, safe water is one of the foremost hurdles for developing communities across the globe, with 29 per cent of the global population lacking access to safe drinking water and 61 per cent without access to adequate sanitation.
Through the funds we hold in our Positive Impact Portfolios, we invest in a number of companies providing solutions to this global problem, including Suez, Xylem and Beijing Enterprises Water Group. And through our online calculator, savers can see just how far their investments in these and other companies has gone toward meeting the UN’s goal.
Quantifying good intentions
For example, had an investor saved £20,000 – their full annual ISA allowance – into our Adventurous Portfolio in 2018, our calculator shows they will have cleaned 72,000 litres of water – equivalent to the waste water from an entire household. For those that saved £100,000, their investment alone would have cleaned a staggering 360,000 litres of water.
And it’s not just water. With £120,000 in our Adventurous Portfolio, our theoretical investors will have collectively contributed to the prevention of 23 tonnes of CO2 being emitted into the atmosphere, equivalent to taking six cars off the road. Moreover, they would have made 43 medical interventions, generated enough renewable energy to power five households for a year and delivered 41 hours of school or university level education to help advance communities across the globe.
For some investors, this alone might be all the good feeling they need. However, for the rest of us, it is equally important that our money helps us, too. Thankfully, more and more evidence shows that companies that do good, produce good returns.
As investors can see from our reporting, our Adventurous Positive Impact Portfolio has consistently beaten its benchmark every year for the past six years (to August 2018), delivering an average annual return of more than 10 per cent.
A number of completely unfounded myths still pervade the impact investing space: that ethical and sustainable fund managers are all boring, data obsessed, sandal-and-socks-wearing hippies, for example. However, the idea that it is impossible to track the real, genuine impact that every, single investor’s money is having on the world is no longer one of them; nor that they have to choose principles over profits.
To try out EQ Investors’ Positive Impact Calculator, or download their annual impact report, visit https://eqinvestors.co.uk/positive-impact/
