Impact investing: putting theory into practice
Impact investing: what this strategy is changing in the global society
Designing such “Social Impact Investing” opportunities raises many challenges. The main one is driven by the fact that this intentional impact should be able to be measured and reported. It means that, on top of the usual financial return measurement, you need to create a completely new information flow toward the investors, based on concrete indicators. These indicators will cover a much wider range than just a financial return, from a greater volume of available drinking water to an amount of renewable energy produced or a larger surface of depolluted land. You also need to make sure that these indicators will be correctly filled, with regular, independent, careful controls.
To be credible, both the indicators and the way to gather them will have more and more to be strictly defined and shared across the Industry. We have to avoid any “impact washing”. That’s why, at BNP Paribas Wealth Management, we regularly share on impact trends with our various stakeholders in our finance sector and beyond, with asset managers, private banks, auditors, clients and entrepreneurs.
That’s also why I personally welcome very positively "the principles of impact investing" just revealed at the Annual Meeting of the World Bank and International Monetary Funds in Indonesia. This framework will help the rise of impact investing as a “mainstream” asset class. I wish them a long and fruitful existence!
Impact investing: limits of this social investment strategy
However the importance of these “Impact investing Principles” shouldn’t make us forget that our clients have multiple ambitions for their investments. Being one of the most sophisticated form of sustainable investments, Impact Investing won’t represent 100% of the assets invested. Indeed some investors may want to ensure that their money is doing some good when being invested, without asking for specific measurement of this impact. For other investors, their concern may be to avoid some sectors or products which affect negatively the environment or the society. Those ones will be reassured by our exclusion policies, which ensure for example that the BNP Paribas Group won’t invest in any company related to the tobacco industry. This is a new fit that we are currently nurturing, about matching the rising convictions of our clients and those of BNP Paribas as a group, expressed in our company engagement policy. Last but not least some of our clients do not want to be investors only, but also donator. We will continue to leverage our 10 years track-record on Philanthropy Advice to these generous clients, in Europe, APAC and the USA.
Respect of international regulations, client interest protection, renewed client experience accelerated by technology… our wealth management industry has been through many challenges the past few years, and that’s why I’m so much passionate about it. This new shift making sustainable investments mainstream will also offer us some great experience… and a concrete contribution, together with our clients, for a better world.
We are clearly seeing a major shift in what investors want to do with their money. Sustainability is progressively becoming a top-of-mind criterion for decision making by investors around the world.
They want not just returns but also to have an impact on an issue, be it environmental or social. This trend is even reinforced by their increased willingness to have a view on this impact, e.g. through reports and KPIs.