Top 5 Takeaways from the Investing for Impact Conference

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Top 5 Takeaways from the Investing for Impact
Conference
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Source FactSet, Athena analysis
This month The Economist held its second
Investing for Impact conference in New York
City. The event drew over 200 attendees including
financial professionals, institutional investors,
policymakers, academics, impact investors, and
philanthropists.   This years gathering focused
on the world at a crossroadsfrom equality of
opportunity to climate changeand how growing
uncertainty is attracting increased interest from
investors. Throughout the conference, panelists
debated whether investing for impact will remain
a niche in the financial industry, or whether it
will become a powerful agent for global change.
  I offer the following 5 takeaways from the
Investing for Impact conference. 1) Impact
investing still has a lot to prove   There is
growing awareness among investors about the value
of ESG (environmental, social, governance),
long-termism, and impact investing.
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Recent studies show that 75 of asset owners are
interested in impact investing, and 86 of
millennials desire to invest in ways that reflect
their social and environmental values.
Approximately 9 trillion is currently invested
in impact, showing that significant capital is
flowing to these strategies. This calculation
uses a broad definition of the term, however, and
debate continues as to what should be included.
Further, while impact investments are attracting
more and more capital, many have yet to produce a
long-term track record. This continues to cause
risk aversion, particularly among institutional
investors that cling to the Milton
Friedman-inspired view that businesses that
attempt to maximize shareholder value will
ultimately do the most societal good. Indeed,
according to one survey cited at the conference,
only 30 of the chief investment officers at
Americas largest pension plans consider ESG
factors to be important considerations in
investment decision making (up from about 10
twenty years ago). Impact investments will need
to provide more evidence of their effectiveness
otherwise the industry will be challenged to
advance.
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2) Capital can be an effective change agent Most
panelists agreed that impact investments will
meet the challenge of delivering the necessary
performance data, particularly as track records
mature. Audrey Choi, chief sustainability officer
at Morgan Stanley, noted that most studies have
shown that companies focused on material ESG
factors perform better financially. Harvard,
Oxford, and Morningstar have recently published
studies that show a positive correlation between
impact investing and returns. This view was not
universally shared, however. Some speakers
insisted that the academic evidence is not yet
persuasivelargely because of the inherently
subjective nature of what qualifies as true
impact. Nonetheless, throughout the conference,
panelists pointed to BlackRock Chairman and CEO
Larry Finks January letter urging companies to
demonstrate a social purpose as they pursue a
long-term growth-oriented strategy as a watershed
development for impact investing. 3) The laws of
good investing still apply Audrey Choi of Morgan
Stanley also reminded attendees that the laws of
good investing still apply to impact investing
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.As with any investment, due diligence, analysis,
and manager selection are essential before
committing capital. There will always be a bell
curve of investment outcomes, just as in
traditional finance. Still, as Ms. Choi
emphasized, more information is almost always
better when it comes to investing and in that
sense, why would one want to ignore a companys
ESG-related culture and capabilities? 4)
Diversity reduces risk Investors have
traditionally under-valued the contributions of
women in the economy. Investment strategies are
emerging that recognize the growing influence of
women, as well as the more general economic value
of diversity.   Jean Case, chief executive of the
Case Foundation, commented that when the
composition of a group is more diverse, it
produces a broader range of ideas and
breakthroughs. Investors should not want more
diversity merely because it checks a box they
should want it because it leads to a better
economy.
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Athena Capital recently released a white paper
that offers our thoughts on investing to achieve
gender equality, including specific gender
inclusive investment strategies that seek to
empower women by increasing their access to
capital, advancing workplace equity, or creating
new products and services. The full paper can be
accessed here. 5) There is no clear consensus as
to whether the public or private sectors should
take the lead in driving change Many speakers
and attendees (based on audience polling) believe
that the private sector should take the lead in
implementing impact-oriented strategies. They
argued that the best talent typically wants to
work in the private sector where innovation can
thrive (e.g., electric automobiles). A similar
number of participants came out on the other
side, noting that government, as the largest
investor in the economy, has the best tools to
drive social progress. Not surprisingly, the
discussion pointed to several examples
highlighted where the private and public sectors
intersect. For example, if the coral reefs of a
tourist-oriented city are in danger due to
climate-related activity, why not form a
business/government partnership to increase
awareness and seek to take action to stabilize
the reef?
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Would governments be more likely to combat the
effects of climate change if, for example,
private rating agencies downgraded government
debt in situations where a local government has
not taken action to reduce the risk of
wildfires? Looking Ahead The subjects
addressed at the Investing for Impact
conference were challenging and
thought-provoking. It is clear that impact
investing has already achieved considerable
progress and has plenty of room for further
growth. I look forward to attending The
Economists conference in 2019 and continuing to
engage with the industrys top minds on the
challenges of this increasingly dynamic portion
of the investment landscape. Article Resource -
https//www.athenacapital.com/blog/top-5-takeaways
-from-the-investing-for-impact-conference/