What impact does impact investing actually have?

We asked Aegon Asset Management’s Head of Responsible Investment Brunno Maradei and ABN AMRO’s Director Sustainable Investing Vincent Triesschijn.

What is impact investing?

Vincent: “Impact investing means investing in companies that not only yield financial returns, but have a positive impact on society and the environment as well. A key requirement here is that you need to be able to quantify that impact.”

How many of ABN AMRO’s clients are already involved in impact investing?

Vincent: “We’re seeing that investing according to ESG criteria is becoming more and more popular. Worldwide, sustainable investments have reached record amounts. ABN AMRO is currently managing 20 billion euros’ worth of client assets in sustainable investments, of which 1 billion euros in impact investments. We’re incredibly proud that the new Impact Equity Fund has already raised 200 million euros.”

The term ‘impact investing’ makes it sound like sustainable investment. What’s the difference?

Bruno: “Sustainable investors and impact investors both want to put their money to use in positive ways. While both groups pursue financial goals, and the companies that they select need to have a net positive impact on society or the environment, they each take a different approach.”

Vincent: “Impact investing takes sustainability policies a bit further. What matters isn’t just whether a company’s sustainability performances are strong, but what concrete and quantifiable impact its products or services have on society. How much does the company focus on creating and improving its impact – and how does it measure and report on that impact?”

How do we make sure that we select the right companies for an impact equity fund – ones that actually have a positive impact?

Vincent: “We select companies with the best Environmental, Social and Governance (ESG) ratings in their respective sectors and industries: the best-in-class principle. We then further refine that selection by excluding companies that are regarded as controversial, for example tobacco companies and arms manufacturers, but also companies that have experienced work-related incidents such as workplace accidents or serious misconduct within the organisation.”

Bruno: “Then we use the UN’s 17 sustainable development goals to measure each company’s positive or negative impact. Those sustainable development goals – or SDGs – basically serve as an agenda for making the world a better place, for example by reducing poverty, providing access to clean water, promoting good health and combatting climate change. If we want to invest in a company, its products and services must contribute to achieving an impactful goal – and those operations need to be substantial.”

The Impact Equity Fund recently went live, but the work does not end with selecting companies, of course. What happens now?

Bruno: “Our fund is an active shareholder, which gives us voting rights. We can choose to leverage those voting rights if we notice that a company isn’t doing enough about specific sustainability issues. More importantly, however, we become involved in the companies that we select. We talk to them about their impact and what they’re doing to manage ESG risks. We want to build relationships that last, for the benefit of both the companies and our clients, and consequently drive companies’ impactful operations and encourage them to quantify and report on those operations.”

Is impact investing the future?

Vincent: “Impact investing is definitely on the rise among investors. Over the past year, sustainable investing has significantly outperformed traditional forms of investment. It’s picked up speed during the Covid-19 pandemic, partly because sustainable sectors and industries showed themselves to be better capable of handling the crisis. ABN AMRO and Aegon Asset Management expect sustainable investment regulations to be introduced in the future that will further accelerate the popularity of sustainable and impact investing during the years ahead.”

Bruno: “Investors are becoming increasingly aware of the real impact that they can have to bring about enduring change for the better. Whether in terms of climate, social or other environmental changes, this gives them an unprecedented opportunity to use their money to make a positive impact on the planet.”

Vincent: “We’d like impact investing to become a fully developed asset class for investments from 50 euros to 50 million euros. Of course it’s important to remember the risks inherent in investing.”

Do you have anything else that you would like to share?

Vincent: “Our clients can make a real difference with their investments, particularly impact investments. We should join our clients in continuing the dialogue, for now and for generations to come.”