How to have a positive impact: EXACTLY

In the new, modern world of impact investing, proving you are doing good is as important as doing it.

FacebooktwitterlinkedinmailFacebooktwitterlinkedinmail   by Damien Lardoux, 18th March 2019

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, that can prove how positive their impact is – who can point to what they are doing and say that this is EXACTLY how much good we are doing. With the exception of Bono, perhaps, for whom no feat is likely too great.

This is a big problem for the investment industry. Still reeling 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. 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 – right down to the last centilitre of water saved.

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.

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.

Market-beating returns

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. Until recently a dogged myth clung to the sustainable and impact investing universe: that in order to do good, investors had to sacrifice returns. Thankfully, however, ever growing piles of data from the likes of Morgan Stanley, Oxford University and Harvard Business School are showing otherwise.

More and more evidence shows that companies that do good, produce good returns, as working in harmony with legislators and society – rather than against them – pays dividends. As investors can see from our reporting, our Adventurous Positive Impact Portfolio has consistently beaten its benchmark every year for the past six (to August 2018), delivering an average return of more than 10 per cent annually.

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.

In the new, modern world of impact investing, proving you are doing good is as important as doing it. And those that aren’t, ought to try a little harder.

Download ‘The Good Guide to Impact Investing’.

About the author: Damien Lardoux

Damien has an MSc in Management from Reims Management School and an MSc in Wealth and Asset Management from ESCP-EAP Paris Business School. He is also a CFA charter holder, being a regular member of the CFA Institute and CFA UK society.

Before joining EQ Investors, Damien worked for Bank of America Merrill Lynch being responsible for asset allocation, security selection and portfolio construction. Damien now acts as the portfolio manager for the EQ Investors Balanced, Positive Impact and Multi Index portfolios. He also co-chairs our Fund Selection Committee.

Damien is a devoted sportsman, playing judo and squash on a regular basis. He also enjoys hiking, to very far places such as the Himalayas and Kilimanjaro.

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