Nice problem (if you must have one): Even with as an estimated $228bn industry reporting 13% asset growth annually, impact investing needs a clearer definition.
But in the introduction to the Financial Times new Special Report Impact Investing
Owen Walker is trying to help:
“At its core, impact investing is an emerging field of asset management where environmental or social outcomes are valued as highly as financial returns. The close monitoring and careful analysis that go into making sure an investment achieves a financial gain are applied to the sustainable or sociological targets as well.” “Impact investors shoot for clearer goal”
That kind of valuation is not easy. Even the putative leader in developing such long term analysis and reporting, the International Integrated Reporting Council http://integratedreporting.org/ ,
has found it challenging to develop models. Dominic Barton, formerly of McKinsey & Company, the newly-appointed IIRC Chair, accepted that responsibility with this sentiment: “I believe that through the adoption of integrated reporting internationally we can make real changes to the way business and our markets as a whole function. We can ensure that business is working for society, for the planet and for all stakeholders.”
Also under the impact investment tent: Larry Fink, Chairman/CEO of BlackRock,who created quite a stir with his annual letter, “Larry Fink’s Letter to CEOs – A Sense of Purpose”:
“A company’s ability to manage environmental, social, and governance matters demonstrates the leadership and good governance that is so essential to sustainable growth, which is why we are increasingly integrating these issues into our investment process.”
Finally, there is the minor problem of synonyms for impact investing. Examples: socially responsible investing, value investing, “B companies”, and “purpose companies”.
Nevertheless, Walker also explains that much of the “soaring” demand for impact investing is coming from two growing groups of investors — women and millennials who are “increasingly demanding their savings do more than just appreciate in value.” Such “doing more” is often measured by how well the socially-responsible companies are cooperating with the United Nations Sustainable Development Goals. The SDGs are very specific global targets for improving socio/economic conditions such as poverty, health, diversity and resource conservation by 2130.
The FT special report also includes a bevy of companion articles illustrating the, well, potential impact, of impact investing. Among them: “Two influential financial figures debate whether social impact is compatible with financial returns” and “It pays to be a sceptic when reviewing impact investment growth”.
Also a look-ahead articles:
“The generational shift in how impact investment is perceived will test the financial industry’s mettle”; and “How Howard Buffett [grandson of the iconic Warren Buffett] is urging the younger generation to add impact to the value investing mix”.
Looks as if impact investing may be a generational thing. Today’s generation and tomorrow’s.