Novethic highlights credibility risk of impact investing

A new model of impact investing funds is emerging mostly articulated around the United Nations Sustainable Development Goals (SDGs) adopted in September 2015 and aimed to address various economic, environmental and social issues (poverty, climate, peace, no hunger,…).

Traditionally, impact investing is associated to non-listed assets such as private equity, real assets and private debt with a focus on a few sectors like micro-finance, property, energy as well as health, food and education. However the SDGs are being perceived as a new referral for classic socially responsible investing funds (SRI) as they narrow the gap with pure impact investing strategies.

French public responsible investing research center Novethic said in its latest note that 87 financial companies have so far been involved in the latest spate of SDGs-related initiatives launched, that gather a number of investors such as pension funds, insurers, asset managers, foundations and banks.

The Global Impact Investing Network recently suggested that some $114bn were managed in impact investing assets by 208 impact investors surveyed.

The study, published in May 2017, revealed that about 26% of respondents track their impact investment performance to the United Nations’ SDGs and another 34% plan to do so in the near future.

If Novethic welcomes these new type of impact investing strategies, in which it also includes green and social bonds, the researcher argues that a number of funds, claiming they make an impact or contribute to the SDGs, do not actually measure their impact.

According to Novethic, these funds should rather be seen as multi-thematic funds as they often tend to only calculate the exposure of their portfolio to sustainable or impact thematics that are linked to the SDGs : nutrition, health, education, renewable energies, water cleaning.

Novethic’s note emphasises therefore on the risk of impact washing. The credibility of the impact investing is at stake, explained the note’s author Harald Condé Piquer, who highlighted that impact investing initiatives must rely on clear goals and trusted indicators to be credible and that is not the ambition of all strategies that aim to finance sustainable development.

To read the full note (in French), click here.

Adrien Paredes-Vanheule
Adrien Paredes-Vanheule is French-Speaking Europe Correspondent for InvestmentEurope, covering France, Belgium, Geneva and Monaco. Prior to joining InvestmentEurope, he spent almost five years writing for various publications in Monaco, primarily as a criminal and financial court reporter. Before that, he worked for newspapers and radio stations in France, in particular in Lyon.

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