The impact investingby definition, it has to do with the positive impact it has on the environment and the society, so that to measure that effect is as important as monitoring the profitability, financial. However, there is a lack of standardization of the non-financial information, which exacerbates the inefficiencies of the information.
The result are disparities between the published data -due in part to the different measurement requirements of an industry or region to another-which makes these data sets are difficult to compare and, ultimately, that the evaluations of the sustainability of businesses on the impact are unclear or inaccurate. This deficit in the field increasingly wide range of responsible investment and impact emphasizes the need for a commitment much more firm, deep, and systematic of the shareholders.
A large part of the data managers are based on measurements of wallets added easily available and in case studies bottom-up, which leaves a gap in the middle. This missing information until the date must be sought actively in the companies in which it participates, through a meticulous manual process of gathering engagement data.
Although it may seem arduous and long, this task is necessary to provide to the shareholders a reliable information on the results of non-financial investment impact and records of the business sustainability of impact in which they are investing.
To develop a profile of the impact more clear of a company to evaluate the data obtained through the participation it is worth combining quantitative and qualitative factors. That is to say, taking into account both theory and practice, the intentions of the companies observed in relation with sustainability, as well as their actual achievements and generators of income in this regard.
Although it may seem arduous and long, this task is necessary to provide to the shareholders a reliable information
Between what a service provider of impact investing can try to determine is the level of intensity in the culture of a company and among its senior executives. Many companies can try to paint your old strategy (only benefits) with a green tone.
However, this can be unmasked easily by the absence of a Chief Sustainability Officer (with appropriate seniority and operational experience), a role that is likely to be as important as it was the Chief Compliance Officer (COO for its acronym in English) after the global financial crisis. In addition, leading companies in the impact will have a compensation of C-level linked to the objectives of sustainability, but they are a minority.
The degree of development of a company in the measurement of the impacts non-financial is another key measure. In the next few years, this area of disclosure should be developed enormously as businesses become familiar with the calculation of your position on the lines of global warming from the Intergovernmental panel on Climate Change (IPCC, for its acronym in English), and compete to maintain the planet.
Engagement with companies can take many forms. The focus of the questionnaires in white usually generates response levels negligible. Similarly, the outsourcing of the commitment to a third party or even to a specialized team within the organization itself discourages managers in this crucial element of impact investing. A method more effective and rewarding, it piques the interest of the majority of the selected companies, consisting of a process of direct engagement of several steps.
Sustainability is a journey, and companies from various industries are making an effort
The first step is to find all the relevant information and publicly-available discussion areas from sustainability reports, websites and presentations. Then the portfolio manager may summarize the conclusions and to establish a verbal contact with the companies in question to make sure that they are reliable.
In some cases it may be difficult to get a response, but with tenacity and perseverance, the manager will get the necessary data and the numerous exchanges you will feel more connected and better informed of its afliated companies. In addition, keep a conversation about sustainability, pure, without covering the traditional finance can be refreshing and highlight the mutual benefits of the process – in many cases, companies can ask managers to share approaches that have been observed in other cases.
In general, the commitment is a powerful instrument of communication that strengthens relationships between asset managers and its subsidiary companies, creating a solid base for frequent exchanges and transparent.
It is important to note that the goal is not to be punitive or to wait for a result totally ‘green’, but to produce a general overview easy-to-read, comparable data sets and a record of progress that can be followed over time. Sustainability is a journey, and companies from various industries are making an effort, either to improve the disclosure or update sustainability goals.
The commitment is a powerful instrument of communication that strengthens relationships between managers and their investee companies
A framework of clear commitment to provide a portfolio manager a better understanding of enterprises both from the point of view of qualitative as well as quantitative and aggregate data to enable them to extract specific data points and make a follow-up of the improvements of the portfolio over time. Also, it will offer a more complete picture to customers who wish to evaluate the portfolio according to different criteria.
***Rupert Welchman he is co-director of European equity and co-manager of Income Strategies Variable with a Positive Impact on Union Bancaire Privée (UBP)