We need to disinfect the investment industry and shift it away from focusing purely on financial performance and returns to shareholders. Why? Because the economy is not only about money. If economic development aims to improve the wellbeing of people, then ultimately the economy reflects how well society is run and the level of our wellbeing. If we want to live and thrive in healthy and resilient communities, we need to ensure that private capital strengthens the inputs that are the measures of true societal wealth; that reinforces equality and inclusiveness, and protects nature and ecosystems, all while still making a profit.
Is the industry ready for this shift? Absolutely, I have no doubt. Impact investing and the integration of deep ESG is no longer a radical or extreme approach, rather it’s a highly plausible and achievable strategy. Triodos Investment Management has always invested this way, and momentum within the industry is building. Insights from the recent Global Impact Investing Network’s (GIIN) Annual Impact Investor Surveyindicate that impact investing has grown in depth and sophistication in the last 10 years. Of 294 respondents, 61% of those sampled are exclusively impact investors and 69% see the market growing steadily. Although the integration of ESG into investment decisions still tends to be fairly light, with (partial) negative screening used to mitigate risk, deeper integration for positive selection is where the whole industry is headed. Applying the laws of demand and supply, coupled with the shifts in societal expectations, I expect that impact investing will accelerate to such a point that by 2030 it will have become the mainstream approach.
When I talk about this shift, people often ask if I’m afraid of the competition. I always reply no, because on the contrary, I welcome it. The entire investment industry needs to become more ambitious and more responsible for creating the quality of social welfare in our communities. I am confident Triodos Investment Management will remain a pioneering frontrunner. We have a very strong strategic position, and for all the sectors and transition themes that we invest in, we have a vision, we have a theory of change and a very robust selection process. Our financial analysts and sustainability analysts work closely together, and we discuss every decision thoroughly from a financial and impact perspective. Our sector knowledge and the in-depth discussions we have in investment committees distinguishes us from the competition.
Rethinking the future
The Covid-19 crisis hasn’t really told us anything we didn’t already know. We were already aware of the existence of extreme poverty and that it contrasted with super-capitalism and 1% of the world’s population being excessively wealthy. We were aware that lifestyle and business practices could contribute to climate change. What we have learned however, is to ask ourselves what kind of world do we really want to live in, and how urgently do we want to tackle the global challenges we face? As institutional investors we have learned to ask what role can finance play in overhauling the system that got us here in the first place?
The French talk about l’avenir, the future that will occur if policies and practices remain the same. But we can redesign a different future if we take action and rapidly accelerate impact investing. For example, the EU’s Green Deal can speed up the energy transition, and we can create an agricultural sector in which food production and the protection of biodiversity go hand-in-hand. It’s this kind of potential future that I want, one that impact investing and deep ESG can underpin. I encourage all investors to pursue it.
For more related news and views, insights and economic outlooks regarding COVID-19, visit the COVID-19 pandemic page on our website.