Concretely measure environmental and social impacts: impact investing culminates at the highest level of sustainable finance. This niche market, estimated at only USD 500 billion, is generally accessible through illiquid private equity funds. In response to this gap, Banque Bonhôte launched an impact fund of funds in July that offers weekly liquidity. An update with Valentin Girard, Head of the “Bonhôte Impact” program.
“Quantifying the impact delivered by the portfolio is essential,” says Valentin Girard of Banque Bonhôte.
Levels of responsible investment
A little theory to start with. Responsible investment divides into three levels. The first made up of exclusions from undesirable activities. Then, the sorting of company scores by positive ESG filters brought a new dimension: the “best-in-class”.
At the top of sustainable finance, pyramids are companies that make a concrete contribution to a positive social and/or environmental impact. Whether it is financing the insulation of buildings or a wind farm through a green bond, their impact is quantifiable. It is worth saying that impact investment differs from philanthropy in that societal objectives have associations with return imperatives.
A multi-asset approach
In order to offer the highest standards of responsible investment, Banque Bonhôte teamed up with Conser, a company entirely dedicated to sustainable investment, which certifies the sustainability of the portfolio.
“We rely on the expertise of Conser, which has been our partner in responsible investment since 2013,” explains Valentin Girard, who is fully in charge of managing the multi-asset fund of funds. “We select managers specializing in asset classes such as green bonds in Europe or ESG equities in emerging markets,” he continues about the fund’s composition.
Also, a significant portion of the fund is composed of impact bonds issued by development banks. An asset class that shares microfinance characteristics: “Through this intermediary, we participate, for example, in the financing of melon producers in Java, Indonesia,” says Valentin Girard.
The fund’s asset allocation varies according to the bank’s market views. The impact of the fund of funds will therefore also change according to the weighting of asset classes. Unlike private equity funds that invest directly in unlisted companies, the newly launched impact fund has the advantage of offering weekly liquidity. “We have made a compromise between the strength of the impact and the liquidity of the portfolio.”
Concrete and measurable impacts
While not all of the UN’s sustainable development goals are easily quantifiable, impact investment really makes a difference. By aggregating portfolio positions, Valentin Girard can measure the effect of the amounts invested by collecting data such as the tons of CO2 saved.
Thus, on the fund’s monthly report, it can be read, among other things, that 520 women entrepreneurs financed and that 36 MWH generated by renewable energies (for every 1 million francs invested in the fund).
The launch of this impact fund of funds is perfectly in line with the bank’s philosophy. It also includes philanthropic aspects such as support for the HUB’s Activation Program in Neuchâtel. “We support this program to develop business ideas that aim to maximize the social and environmental impact, with a local focus,” says Valentin Girard.
(Featured Image By Austin Distel)
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