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Sustainability experts: what's wrong with impact investing

Sustainability experts: what's wrong with impact investing

The lack of an accepted methodology to truly measure investment impact makes the adoption of sustainable development goals in listed  equities increasingly challenging.

This was the core issue raised during a discussion on the hopes and hurdles facing sustainable investments at Finanz’18 conference in Zurich.

Daniel Wild, head of sustainability investing research and development at RobecoSAM, said impact investing should be as transparent as possible.

'You have to know what you want and it has to be measurable, so you can quantify the impact in relation to the 17 Sustainable Development Goals.’

Figures focus

He said investors often expect to see tangible figures relating to how carbon emissions the issuing firm has avoided, for example.

Pointing to existing examples, Wild said Spain shows how wind power is being shown to replace unsustainable sources in the energy mix, but this brings with it problems.

'Someone can claim your energy mix is wrong or your operating hours are wrong. I think this is all fair but it should not stop you from making investments in a project or a company which makes a lot of sense in this sense.'

Seema Suchak, sustainable investment analyst at Schroders, disagreed with Wild when it came to measurability of impact.  

'We shouldn't make assumptions on measuring impact. For example, we will go to the companies and say: "You have this strategy, you are investing x amount of money into it, what impact do you want to achieve and how you are planning to do that?"

'A lot of funds are being repackaged as sustainable strategies and impact investing at the moment, which worries me quite a bit. This is because they are not going quite far enough along the line on sustainability.'

Material considerations

Zoe VanderWolk, clean energy fund manager at Swiss boutique Quaero, said measurability is particularly challenging if you start looking at sustainability of composite materials that go into one wind turbine, for example. 

'Sometimes we have investors who come in and ask: "If we invest 100 million into your fund how much are you going to lower your carbon footprint by?" Unfortunately right now you also have to have a look at the intentionality aspect and where all of this is going.'

VanderWolk said requests for impact measurements are increasing but even solar energy companies face challenges, as it takes a lot of electricity to produce one battery.

'If people are looking just for redemption of the carbon footprint today then that will push them to invest in Apple and Google. This will leave this massive opportunity to invest in the shift to zero carbon world.’

VanderWolk added that measurability should be allowed time to increase and improve when it comes to investing in impact and it did not undermine the case.  

'We are in such an infancy stage with impact investing that you can't assume that companies are going to be perfect right now, otherwise you are not going to get any truly impactful investments.'

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