Impact investing was a top theme at this year’s Challenge of Change Forum in Montreal from October 1-2. And while there has been growing interest in the topic over the last few years, the question for pension investors remains—is it possible to reconcile doing good with the risk-adjusted returns they need to meet their pension obligations?
To answer that question, we turned to Amit Bouri, CEO and Co-Founder of the Global Impact Investing Network (GIIN) in New York. During his session at the conference, we asked him what questions he’s being asked, where impact investors are at with the data, and why investing for positive impact doesn’t mean sacrificing returns.
CLC: What kinds of conversation are you having with institutions today?
Amit Bouri: We are seeing a huge growth in interest from asset owners, including pension funds. There is an increasing recognition of the importance of ESG integration that has taken hold over the last few years. This has been motivated by thinking of ESG as a way to mitigate risk. However, the trend now is that many investors want to have a positive impact directly on issues, like mitigating climate risk or increasing inclusive economic development in their own regions or globally.
CLC: Has COVID-19 affected how they see impact investing?
AB: For sure—the pandemic and its financial impact have definitely accelerated the interest in impact investing. And there now is a role to play for investors who want to put their capital to work across multiple dimensions—not just in the area of financial outcomes but also achieving a strong impact on other areas like the local economy or even the health of the planet. This shift in thinking is driving a lot of interest in impact investing right now.
CLC: Data is already a problem in the ESG space. Is finding reliable data more challenging in the impact investing space?
AB: Data is a huge issue for us. Mainstream investors are incredibly interested in data and how we measure impact. At GIIN, we launched a system called IRIS+. It allows investors both large and small to start with a thematic area such as clean access or gender equity. From there it helps them identify specific strategies they can use and connects them to core metric sets to help them manage performance and translate their impact investing intentions to investment results. It allows pension investors and asset owners to bring these big goals down to an operational level. IRIS+ has been out in the market for 16 months and we already have 11,000 users.
CLC: Coming back to COVID-19, will the pandemic have a permanent impact on how we think about investing?
AB: We think it will have a lasting impact and, right now, it is accelerating trends that were already underway. Last year interest in impact investing was booming around the world – in the last few months that has increased significantly. We tend to refer to the pandemic as one crisis, but it really contains several crises—a health crisis, a financial and economic crisis, a racial justice crisis, a climate crisis, and a crisis in trust in the system itself. The pandemic has investors thinking about the role they play in addressing these huge systemic issues. For example, how many people were working but not secure—that fragility and vulnerability is shifting societal values.
CLC: Pension plans have started to embrace ESG as risk. But are there impact products out there that aim for market returns in addition to impact?
AB: This comes up all the time—is it too good to be true? There are a range of impact investing opportunities that are financially viable. But not all will provide a return. The vast majority of impact investors are seeking risk-adjusted rates of return. It means there are plenty of things they can invest in that will achieve a positive impact and help achieve investment objectives. Right now, 90% of impact investors are meeting or exceeding their financial objectives. Many of the larger institutions that have been active in impact investing have also increased their allocations to it. That means they are meeting their financial obligations.
Watch the whole session here: