A detailed look at impact investing

More than ESG integration: investing with the goal of financial and social improvements

Investing with impact

Impact investing is an exciting step in the evolution of responsible investing. Impact is a type of sustainable investing, a way of making investment decisions which aim to deliver positive financial returns and a benefit to society at the same time.

While responsible investing means integrating environmental, social and governance (ESG) criteria, and excluding certain assets from portfolios, impact investing goes one step further. It covers a broad range of complex social and environmental objectives that aim to build a better future.

In simple terms, it’s about investing in prosperity for people and prosperity for the planet.

Being able to measure the benefits is critical – impact investing has clear, demonstrable objectives. At the same time the financial targets are not token, but aim to be competitive, market rate returns.

Our approach to impact investing

Investing with impact is an idea which has grown rapidly in recent years. The United Nations’ Sustainable Development Goals (SDGs), which were established in 2015 to address key global challenges including poverty, inequality, climate and health, have played a vital role in driving the impact agenda. There has been widespread adoption of the SDGs by a wide range of stakeholders – governments, businesses, financial institutions and not-for-profits – as a framework to assess unmet societal needs.

There are 17 SDGs, with clearly defined objectives, as well as 169 underlying targets to be met by 2030.

The roots of impact investing have been in venture capital and private equity. But over recent years the concept has evolved to include the rapidly growing green bonds market. As this investment approach moves further into the mainstream, there has been considerable debate in the asset management industry around how impact can be truly achieved by investing in publicly-listed equities and corporate bonds.

Why AXA Investment Managers for impact investing?

We have strong credentials in this area, having launched our first societal impact mandate in 1998. Its goal was to tackle unemployment, by investing in listed small and mid-cap companies, to create sustainable jobs in France. We now manage a variety of impact strategies, ranging from private equity investments to green and social bonds and listed equities and bonds, which look to provide solutions relating to issues such as healthcare, climate change and biodiversity.

Through impact investing, we want to enhance long-term returns, and this is achieved through the allocation of capital to take advantage of sustainability-related opportunities within large addressable markets. Alongside this, we aim to drive impact by leveraging our investor rights, to influence companies through engagement.

Insights

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The changing climate for sustainable investment

This Decade of Transition series looks at how environmental, social and governance (ESG) investment will play a fundamental role in achieving a more sustainable future

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Impact investing: How private and listed markets offer choice for investors seeking positive change

There is demand for ESG to go beyond basic integration, towards positive impact

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Green bonds market expected to top the $1trn mark in 2021

Despite the year’s myriad of challenges, 2020 represented a huge step forward for the green bond market.

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