The context of a society weakened by the health crisis, growing inequality and climate change is leading companies to reconsider their organisation, objectives and activities.
We can understand the central role that impact investing will play in responsible finance: it will no longer be a matter of taking extra-financial criteria into account when analysing the management of companies, but of identifying those whose activities have a positive impact on society.
Why invest for a positive impact?
Governments are setting ESG (environmental, social and governance) targets today so that humanity will not be forced to face its fate tomorrow. The main challenges of the future are all interlinked and include access to healthcare and education, and efforts to tackle hunger, poverty, inequality and environmental damage. Such themes form the basis of the 17 SDGs (Sustainable Development Goals) defined by the United Nations so that we can live in a sustainable world.
The financial industry has a role to play in supporting the transition by steering investments depending on the sensitivities and requirements of each individual investor.
Our purpose today is not merely to argue in favour of factoring ESG criteria into portfolio management, but to inform investors about the action being taken to meet these sustainable development goals. This is the value that lies behind impact investing: investors can generate a positive and measurable social and environmental impact, as well as a financial return.
ENVIRONMENT AND SOCIETY: THE ROLE OF COMPANIES ASSESSED IN TERMS OF IMPACT
If a company’s impact is to be assessed accurately, it is first of all necessary to transpose any targets set at a macroeconomic level to the microeconomic level. For instance, how can we assess a company’s action in favour of eradicating hunger in the world (one of the SDGs)?
This can only be assessed in light of the specific business sector in which the company operates. It is necessary to factor in the company’s intentionality and resolv
Companies should begin by establishing which of the sustainable development goals they are able to get involved in and report on. They must make sure they adopt a methodology that is both transparent and comparable with those of other companies in their sector. Otherwise, it will be difficult to aggregate the data at portfolio level as part of an impact investing strategy.
A company can take up positions in the impact investing universe in various ways. It can assess the positive impact generated by its activities. It can also diminish the negative impact generated by its activities, for example by improving its energy efficiency, by auditing its supply chain in order to limit its carbon footprint upstream or by working on its production chain. A company can gain generally good ESG credentials by treating its employees and suppliers well and by maintaining good relations with its local communities.
Impact fund managers are interested in the positive social impact that a company generates for all stakeholders. Irrespective of the impact under consideration, the metric must refer to the beneficiaries concerned. It is necessary to realise that a commitment might impact on several stakeholders, and this will require several different indicators.
Moreover, measurements need to be monitored over time and compared with the indicator’s overall trend in recent years in order to be able to assess the progress made towards reaching the final target.
Impact as part of the climate change theme It is increasingly common for companies to report on their impact indicators, enabling investors to position themselves more precisely on the ESG themes they prioritise and are most sensitive to; at the same time, it gives them a precise overview of the impact their investment is having towards creating a more sustainable world.
IMPACT AT CPR AM, A DYNAMIC IN PROGRESS
In terms of impact, CPR AM has developed a wide range of products offering our clients robust financial returns that can be translated into positive outcomes for the environment and society. Our Climate Action fund (companies that are most committed to combating climate change), Food for Generations (the global food chain and reducing water consumption) – help identify those companies that are the best positioned in the major environmental challenges.
We have formed innovative partnerships, particularly with CDP, the leading provider of climate data, in order to combine the best talents.
In the social realm, we use our Education fund to measure indicators such as the number of pupils in schools and the number of hours of education provided, or the number of meals served in school canteens and student dormitory beds funded. Meanwhile, the Social Impact fund is the first fund on the global asset management market to place the reduction of inequalities at the heart of its investment process in assessing companies on the basis of the five pillars of income, taxation, diversity, education & healthcare, and basic freedoms. That’s why CPR AM has made impact investing a part of its culture and its actions as an asset manager, in the interest of its investors and society
OUR IMPACT REPORTS
To provide greater transparency and make investment even more concrete, we publish an annual impact report for each of these funds.