Impact investing needs to be intentional and measurable

Creating a greener future should be a priority for most of us, and a focus on environmental, social & governance (ESG) factors to help inform decision-making is vital. Impact investing should be a tangible goal that delivers, and shows it is doing so. 

However, greenwashing — which is defined as conveying a false impression or misleading information on the environmental impact of investment — still remains a challenge. 

In addition, there is no standardised system to collectively report on ESG implementation and its impact. The JSE recently published its Sustainability and Climate Disclosure Guidance to promote transparency and good governance, and guide listed companies on best practice.

A recent FM Green Economy Digital Dialogue in partnership with RisCura, Mergence Investment Managers, Nedgroup Investments and Standard Chartered put the spotlight on transparency in impact investing. 

Kasief Isaacs, senior investment principal at Mergence Investment Managers, focuses on energy, infrastructure and impact investments at the company, where he leads the private markets investment team. 

Mergence balances financial returns with impact while incorporating ESG factors into its investment practice. Where possible, the business deploys capital to solve societal challenges such as providing affordable housing.

Their investments prioritise particular objectives and align with the government's National Development Plan.

Nedgroup Investments focuses on four key sustainability areas:  climate change, biodiversity loss, human rights, and diversity and inclusion. David Levinson, head of responsible investing at the company, is spearheading Nedgroup’s drive to become a leader in responsible investing. Investors need to look for money managers who invest in projects that align with their own values, he said.  

In the SA context, it’s not always practical to exclude certain stocks. There’s value in applying pressure on companies to hold investee companies up to a higher standard. The challenge in the pension fund industry is that it’s often difficult to measure impact in listed companies. 

Glenn Silverman, investment strategist director at RisCura, said the biggest investment theme continues to be ESG. He said it’s important to distinguish between the concept — which is not a bubble and is here to stay — and the hot flow of money to particular investments. There are two key aspects to impact investments: they need to have intentionality and they must be measurable, he said. 

Neither the government nor the private sector alone can solve SA’s problems, but it’s the government’s responsibility to create an enabling environment. 

Michelle Swanepoel, head of securities services at Standard Chartered, is an expert in the post trade industry in Africa. Given an inadequate regulatory and legal framework, she said the post trade environment has a unique role to play when it comes to monitoring impact investments, driving social inclusion, promoting shareholder participation and playing a role in market advocacy.

When it comes to monitoring impact investments, the big question is who is the right party to assess claims of greenwashing and to ensure that investments don’t have unintended consequences?