Almost two years ago, Standard Life launched its Global Equity Impact Fund, the first fund of its kind available to individual investors in the area of impact investing.
At the time, Impact investing was a relatively recent growth area in investment management. The fund involves directing capital into large, listed companies that deliver strongly above average financial returns while incorporating a long term vision of measurably helping to solve global environmental and social problems such as climate change, rising inequalities in addition to unsustainable production and consumption.
Despite only being launched in August 2018, it may be safe to assume that attitudes towards the fund and impact investing in general have changed radically due to the scale of environmental disturbances that have taken place across the globe since that time.
Indeed, just last week, a leaked report from JP Morgan on the economic risks of human-caused global heating said climate policy had to change or else the world faced "irreversible consequences." The world’s largest financier of fossil fuels has warned clients that the climate crisis threatens the survival of humanity and that the planet is on an unsustainable trajectory.
The forest fires in Australia are beginning to seem like a shocking harbinger of things to come. As of 14 January 2020, fires this season have burnt an estimated 18.6 million hectares (46 million acres; 186,000 square kilometres; 72,000 square miles), destroyed over 5,900 buildings (including 2,779 homes) and killed 34 people. Furthermore, an estimated one billion animals have been killed and some endangered species may be driven to extinction.
Australia is just one strong example, but there have been numerous extreme weather events across the globe in the past eighteen months in locations such as Brazil, Africa and Asia. Furthermore, record-high temperatures have striped Antarctica of huge amounts of ice.
As well as seeing changes around the globe in terms of climate and weather, we are also seeing changes in attitudes and opinions on how this is addressed. The 20 September protests last year were likely the largest climate strikes in world history. Organisers reported that over 4 million people participated in strikes worldwide. Over 20,000 protested in Ireland, including 10,000 to 15,000 in Dublin (The Irish Times).
It is also becoming increasingly clear that the public are angry not just with the Government but also the corporate and financial sector aswell. It seems that following the rules is no longer enough, now the public expect large companies to be proactive against these issues not just reactive.
With this in mind, Business World decided to sit down with Sarah Norris, Fund Manager with Aberdeen Standard Investments. Aberdeen Standard Investments (ASI) uses the universally accepted 17 United Nation’s Sustainable Development Goals (SDGs) to assess and measure a company’s ability to affect positive change in the world.
These 17 goals have been condensed further by ASI into eight pillars:
· Sustainable Energy : Increasing renewables and decreasing emissions
· Circular Economy: Doing more, doing it better, with less
· Food and Agriculture: Producing quality food and preventing land degradation
· Water and Sanitation: Ensuring access to clean water and sustainable facilities
· Financial Inclusion: Enabling the underserved to participate in the economy
· Education and Employment: providing opportunities for the vulnerable or marginalised
· Sustainable Real Estate and Infrastructure: eco-friendly buildings and connectivity
· Health and Social Care: Giving access to essential care and enhancing healthcare.
"The impact fund is very much focused on investing for intentional social environmental returns aswell as normal financial returns," says Sarah. "So its what we call a double bottom line so you’ve got financial on one side and social environmental on the other."
She continues, "We are looking for a statement of intent. We want companies whose core mission is really to deliver impact through their products and services. We don’t want companies who are continuing with their normal strategy but then also pursuing pet projects on the side. So we really want to see a fully dedicated company and mission led businesses that have stated an intentional social environmental agenda."
Aberdeen Standard Investments (ASI) are looking for companies who either have a social or environmental agenda with their products whether that’s specifically tailored bank accounts or inclusion products around financial literacy. This could include health and social care programs or projects looking at global emissions reduction and trying to address climate change.
As Sarah puts it, "Philanthropy is great and there is a place for that and there is a spectrum for capitol but we are very much focused on companies who are going to make money by doing social environmental good."
She names Safaricom as a strong example of what impact investing can achieve. The mobile network operator is based in Kenya and is one of the first companies in the World to come up with a mobile wallet. The company has been a strong advocate in driving financial inclusion in lower income indidviduals. safaricom has worked in refugee camps and is being held up by the UN as a key example of a company having a really high positive impact with their portfolio.
LSN are another company that Sarah holds up as a positive example of what Impact Investing can achieve. They are a life sciences nutrition company focused on how to make the additives that go into food healthier and safer by addressing things like obesity but also malnutrion. The company particularly focuses on fat and salt content. And they don’t just stop with humans but they are also looking at animal feed and one of their projects is reducing carbon emissions from cows.
From an Irish perspective, Sarah is very enthuasiatic about the work of Kingspan for its environmental focus on the insulation of buildings and Glanbia for its focus on better nutrition operations around farming and its responsible policies around waste.
I ask Sarah the obvious question about whether it is possible to make money and have a positive effect? She replies immediately, without hesitation. "One hundred percent, one hundred percent. We want businesses that are making money. We’re not in the business of giving away money, we’re not in the business of philantrophy. So you want companies that are actually going to make money from this. We want companies that are revolutionary rather than reactionary. Thinking ahead of that problem and coming up with a strategy or solution. They are not only answering that problem but they are able to generate return to continue to make more solutions and its that virtuous cycle of wealth that is important."
Sarah says, "I would say with impact investing it must be intentional and it must be measurable. Those are the two corner stone facets and its not just my definition, that’s the industry definition, rockfeller foundation coined the definition of impact investing. That’s a key question for a client to ask is my investment intentional? Is it going into a company intentionally investing and am I actually going to see an impact return?"
For those who want to invest in the Standard Life Global Equity Impact fund the minimum saving/investments amounts are €25 per month via a pension retirement saving account (PRSA) , €125 per month via a regular investment saving account or a lumpsum amount of €10,000.
Source: www.businessworld.ie
