Are your savings supporting positive social change?

‍Celebrating the launch of the Impact Investing Institute. Interview with CEO and former business editor to the Financial Times, Sarah Gordon.

• Is your capital currently being put to work to solve the world’s largest social challenges?
• If someone mentioned ‘impact investing’ would you understand what the terminology means?
• Do you know how you can invest for impact?

The Impact Investing Institute is an independent non-profit organization aimed at helping more people answer those questions and more. The Institute launched on Thursday, November 28th 2019. We interviewed their CEO, Sarah Gordon, to celebrate the launch.

The organization's vision is:

For lives to improve as more people choose to use their savings and investments to help solve social challenges, as well as seeking a financial return.

Specifically, the institute wants to support more capital contribution to the UN’s Sustainable Development Goals.


The discussion began with why Sarah decided to get involved with the institute. She shared:

“I wanted to contribute to a positive movement, I wanted to dedicate the next few years of my professional life to working on something which created measurable impact.”

The Impact Investing Institute was a perfect fit. The Institute’s three main objectives are:

Mobilise big pools of capital

The Institute will focus on increasing the impact of big pools of capital, such as defined contribution pension funds.

Make capital more accountable

The Institute will work on initiatives that improve the effectiveness and accountability of capital seeking to have a positive impact.

Empower people to save and invest in line with their values

The Institute will address barriers that prevent people from investing for impact.

The Time is Right

With these objectives in mind, Sarah emphasized the various factors and global trends which she believes are already providing positive momentum to the wider impact investing space. These factors make now the perfect time for the institute to launch.

“The Impact Investing Institute is launching at a particularly propitious time. There is growing awareness of the urgent need for more capital to address social challenges in the UK and elsewhere, and to achieve the UN’s Sustainable Development Goals by 2030. At the same time, more and more people want to use their pensions and savings in a way that benefits society and the environment, as well as making a financial return.”

Factors positively impacting the space include:

Public awareness: A growing awareness and anger in the public about the failures of policy markets to effectively tackle the global challenges we face.

Individual Responsibility: Individuals are beginning to show greater responsibility for how their own behaviour can impact positive societal change. This is particularly prominent when considering where money is channeled.

In the boardroom: There is a growing recognition in boardrooms that in order to generate sustainable businesses with sustainable profits, you need to think about more than financial return. It matters how you treat your suppliers, employees, and the environment you operate in.

Investor sentiment: Investment managers are beginning to recognize the value of investing in companies which take ESG seriously. This is particularly prevalent for companies which specifically are trying to address the ESG factors in the most material areas of their business. Sustainably run businesses offer a better return in the long term.

Thanks to these factors there is a lot of positive work already being done within the Impact Investing space. The institute aims to both launch its own initiatives as well as support and amplify the work of others. Sarah explained she believes the institute will:

1. Lead on specific projects to support the Impact Investing community.
2. Influence key strategic initiatives.
3. Amplify the good work of others in the space.  

All of this is achieved through a partnership between paid staff and volunteers, and in collaboration with other organisations and initiatives in the impact investing field.

Misconceptions and Barriers in Impact Investing

With any growing space industry, there are misconceptions and barriers to overcome. We discussed with Sarah these key challenges.

Misconceptions

Impact investing means sacrificing financial returns: This misconception is backed up by a report released by the Department of International Development which measures the UK public’s attitude towards Impact Investing. The report explains:

“There is a widespread assumption that sustainable investing automatically requires taking on more risk and sacrificing financial return. Yet there is a robust and growing evidence base that taking sustainability considerations into account in investment decisions can reduce long-term risk and protects financial returns.”

Impact investing and ESG investing are the same: Impact investing is part of the spectrum of ESG investing, whereas ESG investing includes investment that attempts to avoid harm, impact investment aims to deliver positive, measurable benefits to society or the environment, as well as a financial return.

Barriers

Insufficient information and knowledge: Lack of knowledge is particularly present for financial advisors. If advisors don’t know about impact investing, they are unable to discuss it constructively with their clients.

Track record and comparability: For institutional investors, channeling capital to impact investing due to lack of track record and comparability of impact investment offerings.

With these misconceptions and barriers in mind, Sarah worked with team to create a set of projects that deliver practical tools to change or influence behaviour and help grow the industry. For example:

“The Impact Management Project is one organization we plan to partner with in order to move towards a convergence of reporting and measurement metrics in impact investing. Asset managers will be able to record their impact, therefore improving transparency and supporting institutions compare products.”

The organisation's flagship projects for 2020-2022 include:

• Partner with Pensions for Purpose on a programme to improve confidence and competence in impact investing for the pensions industry.
• Collaborate with the Impact Management Project to provide digital tools to allow investors to assess and compare the impact of their investments.
• Partner on a knowledge exchange programme to support the establishment of a new national advisory board on impact investment in Ghana.
• Collaborate with the World Benchmarking Alliance to develop global benchmarks focused on SDG impact, including a financial system benchmark.
• Collaborate on establishing a sector-wide approach to outcome and impact reporting in social and affordable housing.
• Build and disseminate an evidence base on how grant, concessionary and mainstream capital can work better together.
• Produce tools for trade and professional bodies to develop training and accreditation on impact investing.
• Run an advocacy programme on impact investing, with a particular focus on the “S” in ESG.
• Provide high-quality information about impact investing through our website

Leadership

Alongside Sarah is an impressive team of leaders and innovators in the Impact investing space. The Board of Directors will include:

• Dame Elizabeth Corley, chair
• Sarah Gordon, chief executive
• Caroline Mason CBE, chief executive, Esmée Fairbairn Foundation
• Cliff Prior, chief executive, Big Society Capital
• David Carrington, former member, Supervisory Board, Triodos Bank
• Ida Levine, principal, Two Rivers Associates
• Jamie Broderick, former head, UBS Wealth Management, UK and Jersey
• Laurie Spengler (from January 2020), impact investment banker, CDC board member, and industry contributor
• Nick Temple, chief executive, Social Investment Business
• Nick Bensted-Smith, chair, Financial Investment Board, City of London Corporation
• Olivia Dickson, non-executive director, Financial Reporting Council
• Sir Roger Gifford, senior banker, SEB, and chair, Green Finance Institute
• Steven Serneels (from January 2020), chief executive and board member, European Venture Philanthropy Association
• Will Goodhart, chief executive, CFA Society of the UK

The institute also benefits from strong backing across the financial services and social sector. Founding supporters include:

• City of London Corporation
• The Department for Digital, Culture, Media and Sport
• The Department for International Development
• Aberdeen Standard Investments
• BlackRock
• CFA Institute
• Columbia Threadneedle Investments
• Credit Suisse International
• Generation Investment Management
• Hermes Investment Management
• Investec Asset Management
• Schroders
• Triodos Bank

If you want to get involved with the Impact Investing Institute, you can get in touch from their website.

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