Impact, expanded

Channels: IMPACT

Companies: GIIN, Temasek

People: Amit Bouri

The GIIN's CEO, Amit Bouri, believes impact investing can help transform the financial system

For Amit Bouri, CEO of the Global Impact Investing Network (GIIN), these are exciting times.

The organisation he co-founded a decade ago has in recent years gathered real momentum.

It now counts some 100 asset owners and 150 asset managers as members. The big boys of private equity have launched $1 billion impact funds. And its conference – the GIIN Investor Forum – last year attracted 1,300 delegates, and will now be an annual, rather than a biennial, event.

Amit BouriBouri says the membership comprises a diverse range of investors, including big asset managers, banks and fund managers, of all sizes.

Philanthropic foundations are also part of this mix but, contrary to popular belief, Bouri says these are in the minority.

"We see the growth as coming from larger asset owners – from institutions to endowments," he says. "Also, from high net-worth individuals, globally."

As a further indication of the growth of interest in this theme, he points out that Singapore's sovereign wealth fund, Temasek, recently launched an impact investing fund.

"We are at a pivotal time for the market – one of the big drivers of growth is a broader recognition among institutions, as well as individuals, that the challenges of inequality and climate change are too vast and important for capital to underperform.

"This is an incredibly exciting and profound time. It's in a rapid state of evolution."

This flood of interest in impact investing has caused the GIIN to raise its ambitions.

"We have been working on this for a decade and made a tremendous amount of progress, but if you look at the world around us, there's a need for us to be thinking about the role of impact on a much larger scale," he says. "We can move much more capital to what we call impact investing. But what about investment more broadly?

"What is the purpose of impact, what's the end game? It used to be about growing the impact market.

"But now it's about how do we grow impact investing to influence the broader financial system to become more sustainable and inclusive?

"The challenges of inequality and climate change are too vast and important for capital to underperform"

"All investing incorporates impact. We define it as investments made with the intention of achieving and measuring environmental and social impact alongside financial returns. It's now commonplace for investors to consider that, and we want that to become part of every investor's portfolio.

"It wouldn't make sense for most investors to go to 100% impact investing but they can consider the impact of all their investments. That's our vision."

He accepts that impact investing tends to be more focused on asset classes such as private debt, private equity and real assets. But there is a growing number who also want to look at public markets, where the case for impact is harder to argue.

"Impact investing tends to be seeking out companies with a greater degree of focus, ones that have impact at their core," he explains. "But we have a lot of investors who are active in public markets.

"Some are quite excited about pushing the envelope."

There is a debate on whether it is possible to make impact investments in listed equities. Currently the GIIN does not weigh in on this issue.

"We will form a view on listed equities – right now, it's a debate," he says. "It's a great space for a lot more conversations about motivation!"

Bouri continues that impact investing is benefiting from a mutually beneficial relationship with the movement to incorporate environmental, social and governance (ESG) factors into investments, which has also seen an explosion of growth in recent years.

"We are now spending a lot more time working with investors who have been doing ESG for a long time. ESG is leading them to think about impact investing and solutions."

But he says the opposite is also true: investors who start off by exploring their impact often go on to start considering ESG as well.

"It's a two-way street," he says, applauding this trend towards thinking more holistically.

While this growth in interest in impact investing is exciting, it also creates challenges.

Chief among these is the threat of greenwashing, or impact washing, or Sustainable Development Goal (SDG)-washing, says Bouri.

"We have so much momentum and enthusiasm around impact investing and the SDGs that we are starting to engage a much broader set of investors who want their money to be put to work in a way that has an impact," he says. "It's a powerful force.

"If we get to a point where we have any doubts about the integrity of the market, that will lead to a growing cynicism or apathy, and it could potentially unravel a lot of momentum"

"But if we get to a point where we have any doubts about the integrity of the market, that will lead to a growing cynicism or apathy, and it could potentially unravel a lot of momentum."

Safeguarding the integrity of impact investing is, therefore, one of three pillars in its 2019-2021 strategy. The other two are mobilising more capital for impact investing and "fuelling a broader movement that's helping to reset mindsets about the role of capital".

The recent launch of the GIIN's Core characteristics of impact investing provides a key tool to help combat impact washing, argues Bouri, because they help to showcase "what good impact investing looks like". (See box for details of the Core characteristics.)

"We are looking to embed [the characteristics] to drive growth and to manage risk of greenwashing," explains Bouri. "We view these as foundational."

Another key tool is the Operating Principles for Impact Management, which at their launch by the IFC in April had more than 70 signatories with $350 billion of assets. 

Bouri says the GIIN's 'Iris+', launched in May, will "help investors operationalise the principles". Iris+ is a system for measuring, managing, and optimising impact. It is an update of the previous Iris catalogue of metrics.

"Iris+ provides a way for investors to translate impact intentions into real impact results," says Bouri. "This is a huge leap forward for the industry, and it will drive even greater impact performance.

"If you think about all the effort that goes into driving investment outperformance, we want to make sure that the same kind of motivation is brought to impact performance," he adds.

"We want people to use the same definitions. That's why we have Iris+ We have been working out the development of common metrics for the past decade.

"Investors can start with an SDG, identify the core datasets they can use and drive progress towards it.

"It enables much more sophisticated analysis across investments and portfolios to get smarter about how we drive impact performance."