IMPACT

Investing with Impact – A New Way of Allocating Assets

 

19 March 2020

Angelika Delen
Head of Institutional & Distribution Clients, and Social Responsibility Investment (SRI)


The world is changing. We are experiencing extreme weather conditions with increasing frequency which has both environmental and social impact. The challenges to our society and environment – presenting both risks and opportunities – result in a higher demand for advice to understand the impact on investments.


What is impact investing?


The Global Impact Investing Network (GIIN)  describes impact investments as “investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return”.


In the World Economic Forum’s latest global risk report for 2019 presented in Davos climate and climate-related risks were ranked highest by the surveyed stakeholders. Therefore, investors need to create social and environmental benefits in order to generate a positive contribution to their returns.


The pressure on investors to adopt a sustainable perspective has increased by various actions taken by governments or regulators. With the United Nations Sustainable Development Goals and the COP 21 – Paris Agreement the first steps were taken to promote the measuring and understanding of non-traditional risks.


Why?

Several studies explore the theme of impact investing. However, the majority of investors still is not convinced that it is time to take action – now. Maybe because the why is not made clear enough. It is not only about generating positive impact alongside financial return. It is more about being ready for the future. The European Commission’s action plan for sustainable finance is showing commitment for climate and this development will continue. This is not a trend that will be over in a few months. Based on these facts the question is no longer Why?  But rather How to be ready for the future?  And in addition: How to generate financial return and keep my market share? If you can keep return levels steady or grow them further, the social impact will come with it: Profitable and healthy companies are less likely to lay off staff. They are also more inclined to offer or keep up certain benefits for their employees.

Call for Action

Given the latest climate developments, there is still enough room for further engagement when it comes to impact investing. It is necessary to set up a framework with enough flexibility. This should offer incentives for positive contributions to environmental or social factors. Companies now have the opportunity to identify new sustainable business models or develop existing models further in order to increase their market share going forward.  Asset owners need to understand their non-financial risk and shift their money away from it. These measures should be supported by governments and regulatory frameworks. The incentives could be tax advantages/disadvantages, investment benefits or regulatory framework adaption. A close co-operation between private and public sectors is a must-have for further development. The world’s climate is changing and all stakeholders now have the opportunity to be part of the change and grow further.

Disclaimer: FOR PROFESSIONAL INVESTOR USE ONLY. References to Mercer shall be construed to include Mercer (Austria) GmbH and/or its associated companies. This flyer is for information purpose only and does not constitute an offer or a solicitation of an offer to buy or sell securities, commodities and/or any other financial instruments or products (including collective investment schemes) or constitute a solicitation on behalf of any of the investment managers, their affiliates, products or strategies that Mercer may evaluate or recommend. Furthermore, it does not contain investment advice or legal advice in respect of actions you should take relating to your particular circumstances. No investment decision should be made based on this information without obtaining prior specific, professional advice relating to your own circumstances.

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