ImpactAlpha, Aug. 16 – An emerging markets public equities portfolio that actively engages with investees to improve ESG performance. A U.S. environmental commodities strategy that trades carbon credits and finances emissions-reducing projects. And an investment fund targeting European real assets such as hospitals and affordable housing. All three products are deploying sustainable investment strategies. But which strategies should claim an “impact” label? And how does that differ from “ESG integration” or “thematic investing?”
Truth in Impact from consulting firm Tideline seeks to parse the terminology. “We believe accurate self-classification, backed up by robust evidence and independent verification, is a critical part of any sustainable investment journey and essential to growing the sustainable investing space with integrity,” says Tideline’s Ben Thornley (disclosure: Tideline is a sponsor of ImpactAlpha).
- Zoom out. Impact investing still lacks universal standards for product and fund labeling. Capital allocators and regulators are on the hook to evaluate asset managers to ensure they can back up their claims with policies, practices, and processes. “Choosing a label sends a signal to the market about what kind of investment strategy you have,” write the authors. Tideline’s guide helps managers communicate their approach based on the degree to which they integrate intentionality, contribution, and measurement into their investment process.
- Impact labeling. Tideline’s framework builds on classifying efforts from the Global Impact Investing Network (Core Characteristics of Impact Investing) and Impact Management Project (ABC Classification and Impact Classes). In March, the European Supervisory Authority introduced regulation that requires investors operating in Europe to designate their funds in one of three categories according to their commitment to sustainability.
