Webinar recap defining impact

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Webinar Recap Defining Impact

• This summer, Athena Capital Advisors joined the
  Global Impact Investing Network in presenting a
  series of online seminars hosted by Fidelity
  Family Office Services. The seminars, conducted
  during the last two weeks in June, provided an
  introduction to impact investing and also
  highlighted several practical considerations for
  those interested in pursuing socially-driven
  investment strategies.At the start of the
  event, we polled the audience to gauge their
  understanding of the topic. We asked them to
  indicate if they believe there are any
  differences between impact investing,
  socially-responsible investing (SRI) and
  so-called ESG investing.  Roughly half of the
  survey respondents said no.  In fact, though
  they all sound similar, these terms describe
  three distinct ways investors incorporate
  non-financial factors into their investment
  decision-making process.  But given the nascence
  of the impact investing industry, its no
  surprise that investors remain confused about
  what impact investing means and how it works.

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To arrive at a definition of impact investing, it
helps to first understand the objectives of its
close cousins, SRI and Environmental, Social and
Governance (ESG) investing. SRI can be thought of
as a do no harm approach to investing, in which
investors focus on aligning their portfolio with
their values.  Using a negative screening
approach, SRI investors eliminate from their
portfolios any investments associated with
industries or business practices they find
objectionable.  For instance, an SRI investor
concerned about public health might exclude any
companies that generate more than 5 of their
revenue from the sale of tobacco products.ESG
investing is a more strategic approach. Rather
than limiting themselves to negative screening,
ESG investors integrate social and environmental
factors into their analysis of an investments
potential financial risk and reward.  For
instance, an ESG investor concerned about climate
change and convinced that the transition to a
renewable energy economy is underway might
maintain an overweight to utilities that are
actively acquiring clean energy assets. ESG
investing enhances an investors ability to build
a values-aligned portfolio, but most ESG
investors would argue that it also has the
potential to enhance their risk-adjusted
financial returns. 
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In their view, companies with superior governance
characteristics, whose management teams pay
attention to material ESG risks and which
capitalize on ESG-related business opportunities
will be better positioned than their peers for
long-term growth. To explain the ins-and-outs of
impact investing, Athena was excited to have
Giselle Leung, a Director with the Global Impact
Investing Network, as partner in the first part
of the webinar series.  The GIIN is a leading
impact investing institution and has played a key
role in building consensus behind both the core
characteristics of impact investing and best
practices in its implementation.  As Giselle
explained, the GIIN defines impact investments as
investments made into companies, organizations,
and funds with the intention to generate social
and environmental impact alongside a financial
return.  Like SRI and ESG investments, impact
investments are made with an expectation of
achieving some level of financial return, but
they differ in several important
ways.socialFirst, impact investments are made
with the intention of generating some type of
positive impact.  Secondly, as Leung pointed out,
the intention to generate impact also motivates
impact investors to measure the actual social or
environmental impact of their investments. 
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The data they collect is then used to inform
their investment decisions, from asset selection
and due diligence to portfolio management and
business initiatives. Though SRI, ESG and impact
investments can be made in every asset class,
these approaches do lend themselves to some asset
classes more than others.  SRI and ESG
investments are most often associated with the
public markets, while impact investing is
concentrated in the private markets.  Alternative
investments, such as venture capital and private
equity, attract impact investors because there is
such a direct connection between the capital
invested and the impact achieved.  This allows
investors to more easily express their
intentionality and measure the results.While
Part I of the webinar series provided an
introduction and helped demonstrate the growing
scope of the impact movement, Part II delved into
practical applications and highlighted examples
of various model portfolios, featuring different
themes, return profiles and asset-class mixes.
Part I, available to those who register, can be
found here, while Part II can be found here.
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Giselle and I were joined in the first webinar by
Kate Huntington, Managing Director and Co-Head of
Research and Manager Selection at Athena.  In
Part II of the webinar series, Kate represented
Athena along with our colleague Michael Lear,
Vice President, Portfolio Manager and Head of
Athenas New York office. They were joined by
GIIN staff members Hannah Schiff, a Research
Manager, and Kelly McCarthy, Senior Manager, IRIS
Impact Measurement.Article Resource
- https//www.athenacapital.com/blog/webinar-recap
-defining-impact/