Impact investing has become well established in private markets, but it is now playing an increasingly significant role in the world of listed equities. How is this development taking shape at Triodos Investment Management?
“We have been investing in listed companies for thirty years. The focus has shifted significantly during that time. Where we once started with the exclusion of harmful sectors, we have since become fully dedicated to measuring positive impact. Initially, we did this with a best-in-class approach, but that was too subjective. You could still end up with companies that looked good on paper, but were not contributing to the transitions we deem important.
Today, everything starts with the five interlinked transitions Triodos IM wants to accelerate: Food, Resource, Energy, Societal and Wellbeing. We have translated these transitions into twenty concrete impact objectives. For each company, we analyse products and services, linking a share of revenue to these objectives. At least one third of revenue must demonstrably contribute to positive impact. For some sectors, that threshold is much higher, up to eighty percent at the fund level.”
How do you make societal or ecological impact visible in public markets? And how do you ensure that measurement remains credible?
“We look very closely at the revenue associated with products or services that contribute to our impact objectives. We combine this with a thorough ESG analysis and a set of minimum standards that apply both to Triodos Investment Management and Triodos Bank. For example, we do not invest in arms manufacturers or producers of fossil fuels. Additionally, we link our twenty impact objectives to the relevant Sustainable Development Goals (SDGs). The SDGs were not originally designed for listed investments, but they do provide a universal language for direction. Incidentally, when mapping sustainable impact, we aim to go beyond simply measuring revenue. From 2026, we also intend to report on impact outcomes. This will help us answer questions such as how many patients have benefited from the activities of companies we invest in, how much CO₂ emissions have been avoided and how many megawatt hours of renewable energy have been generated. That brings impact into the real world.”
How do you translate major societal transitions, such as the energy transition or sustainable food systems, into concrete selection criteria?
“Within each transition, we have identified sub-goals. For example, the energy transition is structured around three pillars: renewable energy, energy efficiency and clean transport. This enables us to determine, per sector, what truly contributes. We then look at the revenue breakdown. The key question is what percentage of activity falls within those pillars. A manufacturer of wind turbine components will quickly achieve one hundred percent ‘positive’ revenue. But an industrial firm that is making its processes more sustainable might reach thirty-five percent. That may still be interesting for us, provided the business is moving in the right direction. It’s not about perfection, but about progress. We want to support the companies making the transition possible. In this way, you can make much more impact than by simply selecting the ultimate winners.”
Which frameworks or instruments does Triodos Investment Management use to assess companies’ positive contributions?
“Our methodology combines three layers. The first is made up of our minimum standards and exclusion criteria, designed to manage risks and opportunities by assessing companies against strict norms. Those failing to meet our minimums or identified as ‘areas of great concern’ are excluded from investment. The second layer is quantitative, where we look at revenue analysis per product group and its link to our impact goals. The third layer is societal context. Here, the question is how a company positions itself within the five Triodos transitions. All of this forms our own systematic approach, for which we use data from ISS ESG.
In May 2025, we introduced the iSTOXX Triodos Developed Markets Impact Index. This index, which we developed together with STOXX, translates our criteria and measurement methodology into a broadly applicable benchmark. The idea was to provide a realistic alternative between, on the one hand, traditional, broad indices that lack depth and, on the other, extremely concentrated impact portfolios. This universe generates a positive impact of sixty-five percent, compared with twenty-five percent for the MSCI World. We hope this impact equity index will become an accepted standard within the institutional market, enabling scalable, positive impact, also through liquid equity investments. We’ve already received a fair amount of positive feedback from institutional parties.”
Is it the right time to invest in listed small and midcaps?
Impact investing is not only about stock selection, but also about helping businesses make a positive difference. What role does active ownership play in this?
“When you buy shares on the stock exchange, you’re active in the secondary market. We do not provide companies with direct capital, so our added value lies in dialogue. We engage with every company in which we invest, sometimes more than once a year. For each company, we draft an ESG agenda indicating the most critical issues where we want to see improvement. When talking about additionality of impact investing in listed equities, much of that lies in engagement: active ownership to steer businesses in the right direction. Sometimes this involves climate policies, sometimes labour rights or diversity issues. These conversations are not without consequence. If progress stalls, we draw our conclusions. For instance, we divested from a French company indirectly involved in nuclear weapons. They wanted to phase this out over three to five years; we thought that was too slow and sold the position. Engagement is labour-intensive, but it also delivers real change. For companies in Triodos Future Generations Fund, for example, we encouraged the creation of a family-friendly workplace, with better parental leave and opportunities for women on their return. Initiatives like these give engagement tangible meaning.”
What are the main opportunities and challenges for impact investing in listed equities in the coming years?
“The biggest opportunity is that impact can finally be translated into tangible results. Thanks to new data tools, artificial intelligence and collaboration with academic institutions, we are increasingly able to quantify what companies are truly contributing. The challenge is to look past the noise. There is much greenwashing, a multitude of ESG labels and methodologies, but ultimately the question remains: has this business demonstrably improved the world? A second challenge is scale. The institutional world is still cautious. Pension funds must deliver returns but also contribute to a liveable world. They too can encourage businesses to become more sustainable through active dialogue. This goes for the entire financial sector. Our Impact Index offers a middle way in this respect: a broadly diversified portfolio with clear impact. We see that this idea is gaining more and more traction. And then there is the human aspect. Impact investing requires people who look beyond numbers. Perhaps that is our greatest strength. Within the Triodos Investment Management team, we have analysts from a range of backgrounds – financial, sustainability-focused, culturally diverse. Every company we analyse is reviewed twice, both by a financial analyst and a sustainability analyst. This compels us to assess and weigh both impact and return together. Ultimately, it is the people who make the difference.”