AMP Capital is scoping out the prospects for a global listed equities impact fund as demand for ‘deep green’ investment products accelerates.
Emily Woodland, AMP Capital co-head of sustainable investment, said an impact global shares fund would necessarily have a sharper focus than the manager’s existing responsible investment offerings.
“We’re doing a feasibility study now to determine what a ‘deeper green’ fund might look like,” Woodland said.
She said the mooted global shares impact fund would possibly hold up to 40 stocks targeting firms capable of delivering positive change in some of the world’s biggest problem areas such as energy and healthcare.
“Our view is that if investors have a long-term horizon, they won’t necessarily have to trade-off returns [by investing in a global shares impact fund], as long as the underlying stocks are good companies,” Woodland said.
However the mooted AMP Capital fund panned out, she said Australasian investors looking for impact products would have to venture beyond the direct local offerings that the sector is known for.
“The impact investment market in Australia and NZ is fragmented and there’s a real challenge in scaling it,” Woodland said. “Impact investing in the public market space has the scale.”
To date, a handful of large NZ charities – such as BayTrust – have dabbled in direct impact investing, mostly with a focus on community housing. Last year the country’s largest charitable trust, Foundation North, published an impact investment manifesto for the sector. Also in 2018, NZ’s first impact investment fund – the Impact Enterprise Fund – raised about $8 million, again targeting local projects.
Woodland said direct local projects would always appeal to community-based impact investors but the limited opportunity set could not meet the growing demand.
She said impact investing attracted a lot of attention at the recent Philanthropy NZ conference in Wellington with about 90 of the record 500 plus delegates at the event turning up at her session on the topic.
“There were a lot of questions about what impact investing means and how it could fit within their existing investment mandate and guidelines,” Woodland said. “My understanding is that SIPOs [statement of investment policy and objectives] are living, breathing documents that should be allowed to develop.”
Despite the heightened interest from philanthropic groups, she said retail investors were driving most of the demand for impact investing.
“There’s a real generational shift underway and retail investors are showing a keen interest in ‘deep green’ products,” Woodland said.
Impact investing was best viewed as a subset of the wider environmental, social and governance (ESG) universe, she said, with a sole emphasis on tackling big issues via positive action (as opposed to negative screening, for example).
But measuring the ‘impact’ of impact investing remained “the largest stumbling block” in legitimatising the approach, Woodland said.
“Impact investments have to demonstrate what they have actually done,” she said. “We need to develop a common language and KPIs [key performance indicators], for example.”
Coincidentally, last week industry body, the Global Impact Investing Network (GINN), rolled out a new tool designed to improve the measurement issue.
According to a GIIN release, “IRIS+ gives investors an easy-to-use system, including sets of core metrics around certain key themes such as clean energy access, financial inclusion, health, and affordable housing”.
“IRIS+ enables clear and comparable data, and takes the guesswork out of impact management,” the GIIN statement says.
Woodland joined the AMP Capital sustainable investment team – headed by Ian Woods – last November following an 18-year investment career, mainly with UBS in London and Hong Kong (where she is now based).
Early this year, the manager’s sustainable investment team expanded to six with the appointment of Adrian Williams as ESG director real estate and listed equities.
Last November, David Allen, AMP Capital global chief investment officer equities, said: “Investing in companies with long-term sustainable business models is an important part of our investment approach across all asset classes. More specifically, there is growing demand from clients to be able to invest globally in companies that are changing the world for the better, while also delivering strong long-term financial outcomes. Over time, we aim to help clients meet this need.”