Impact Investing: using data to produce concrete results

These days, many private individuals, companies and foundations are investing a portion of their wealth. At ABN AMRO, sustainable investment is now the norm. Still, conscientious investors often wonder what impact their investments are actually having. Impact Investing is using data to determine the net positive (or negative) effect of investments on society.

But first, an example. Let’s say a supermarket chain sells both unhealthy products (resulting in points being deducted from an overall score) and healthy products (points added). What if some of those healthy products are actually flown in from faraway places? Again, points are deducted. The result is a net score somewhere between –10 and +10. The rating gives something of an idea about the impact, positive or negative, that a particular company has on society. Simply put, that’s how Impact Investing works at ABN AMRO MeesPierson.

A tangible impact

“Lots of people take pride in investing their assets sustainably,” says Jan Willem Hofland, Head of the Investment Centre at ABN AMRO MeesPierson. “Still, they start to get curious after a few years and wonder, ‘Have I helped the world in some way? What tangible impact have my sustainable investments had on society?’ Those are precisely the questions we’re answering with Impact Investing.”

Marianne Verhaar, Director of Private Wealth Management, sees Impact Investing as a welcome addition to the sustainable investment spectrum. “In my view,” she says, “Impact Investing is positioned somewhere between sustainable investment and philanthropy. Sustainability is a noble aim, but impact actually packs more punch, since it represents the change needed to address social challenges. But you also need to realise that proper due diligence is a must when it comes to your investments. And that’s why Impact Investing is so powerful: it shows exactly what difference your euro is making.”

The power of a movement

ABN AMRO MeesPierson purchases data on companies from independent sources. These data are then fed into a calculation model, and the companies are assigned a score. “Ask ten firms what sustainability means, and you’ll probably get ten different answers,” Jan Willem admits, “but that’s OK. What’s important is that this strategy is sending a clear signal to companies and investors alike. The days when sustainability was something only the beard-and-sandals brigade cared about are well and truly over. Impact analyses are rapidly evolving and really growing in importance. Together investors are making all the difference.” 

The bank launched Impact Investing on 1 September 2019, and roughly €100 million had been invested by the end of the year. With a €2.5 million threshold, Impact Investing is well suited to high-net-worth individuals, but equally to socially responsible foundations and associations.

Philanthropy remains vital

The growing potential of data means that products like Impact Investing will occupy an ever larger position. Yet traditional philanthropy is not likely to disappear, says Marianne. In fact, it will remain vital. She explains, “Measuring impact is great, and it’s important. But it entails a risk, one relating to the need for measuring results faster and faster – short-termism, in other words. Not everything revolves around direct impact. But the fact that you can’t always measure results directly doesn’t necessarily mean something isn’t worth doing. Far from it, in fact. The world isn’t black and white. It’s enormously complex. Feeling confident about the long term is still important, even if there aren’t any results to measure today or even tomorrow. In cases like these, philanthropy comes into play as a crucial factor in developing, launching, supporting and scaling up a whole range of initiatives.”

Personal reporting

Impact Investing clients can currently consult the net scores of firms in which investments are made. As from the second quarter of 2020, they’ll also receive personal reporting on the effects of their own individual investments. 

“Everyone has a theme that’s close to his or her heart,” concludes Marianne. “For one person, it might be fighting famine; for another, it’s education. Money isn’t an end in itself – it’s a tool. That’s why we think people will be moving from passive giving to actively making donations and investing, and will want to see the impact of their involvement. Impact Investing is a perfect fit.”