Transparent Outcomes, Impact Measurement and Reporting

How can Impact be achieved?

An investment can create an impact in several ways, including:

1. Advocacy Activities

Engaging with Governments or International organisations to work for public policy changes, e.g., more aggressive carbon emissions reduction targets. Or to implement divestment strategies.

2. Engagement with Companies

Stewardship and engaging directly with companies to support positive change at that company, e.g., improved diversity in management or tying management compensation to ESG goals.

3. Community Development and Investment

Using a part of fund proceeds or profits to invest directly in community initiatives, such as affordable housing or small business support.

4. Provision of Funding to Companies

Providing capital for the companies they invest in. By selecting companies that are having a positive impact (such as developing renewable energy), fund managers can support that impact.

What’s important to note is that impact areas can be vast, from financing social housing, small business funding and micro-lending, renewable energy, health and education improvements and international development projects. Some examples of impact investing include:

Investing in companies developing unique technology to improve an environmental or social problem.
Buying mortgage-backed securities which fund affordable housing for low-income communities.
Funding projects that improve the quality of life for disadvantaged communities, such as rehabilitation centres, training, education and employment facilities.
Microfinance loans to support the establishment of small businesses and create economies within developing nations.
Funding initiatives that provide healthcare solutions, research and development to support the health and well-being of communities.
Investing in initiatives that tackle the effects of climate change.

Adding Impact to traditional company analysis

Besides tracking the exposure and targeted returns, impact investors also want to know what each of their investments achieves in terms of impact and measure the contribution that is being made toward their impact objectives.

This additional layer of consideration shifts how companies’ performance is measured away from the traditional risk / return analysis towards a three-layered approach of risk, return and impact.

Companies that can deliver an intentional positive social and/or environmental impact can help investors achieve the outcome that they would like from their investment. Some sectors are potentially better positioned to deliver this (think healthcare, for example).

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