How to assess the impact of a responsible investment approach? Some indicators of the Sustainable Development Goals (SDOs) are contradictory and the logic of a product’s “life cycle” is complex. The difficulty of the exercise is like a pretext for inaction. By Ladislas Smia, co-responsible for Mirova’s research, and Philippe Zaouati, Mirova’s Managing Director.
For a long time, there has been an attempt to judge responsible investment approaches in the light of performance. Financial, of course. For many, investing responsibly meant reducing performance. Many studies have sought to verify this hypothesis, generally concluding that SRI (Socially Responsible Investment) does not only fail to destroy performance, but can even help to better manage risks and detect opportunities.
Impact measurement and the doubt
If the irreducible will always continue to doubt it, most of this debate tends to exist in favor of a new subject: impact measurement. Most investors now want indicators to know how many tonnes of CO2 “emit” their investments, how many cubic metres of water they have managed to save and, more generally, how they contribute to achieving the Sustainable Development Goals (SDOs).
The question of impact measurement is popular in the regulations. In France, Article 173 of the Energy Transition Act requires all investors to disclose the ESG and carbon risks of their assets. A similar regulation adopted at European level. While we believe that this development is necessary, if not essential, impact measurement remains a difficult exercise for those who are really trying it.
Intent as a first step
We sometimes imagine that the impact only concerns certain investors – those who seek to have it -, certain types of projects or companies, such as actors in the social and solidarity economy or micro-finance. This is of course a mistake. All companies, regardless of their sector, size or geographical location, have an impact on society.
Negative, if they are, for example, highly polluting, produce unhealthy food or treat their employees badly. Positive, when they contribute to the creation of quality employment, the improvement of energy efficiency or when they develop innovative health solutions. Most often, they have both positive and negative impacts.
Investors and the impact
The investors who finance these companies bear some responsibility. Thus, while not all investors are “impact investors“, all investors have an impact. Of course, these investors are only one stakeholder among many. Employees, managers, suppliers, consumers, public authorities all contribute more or less directly to the realization of the company’s project. But it is essential to recognize this part of their responsibility, which has long been ignored, and by extension the role they must play in the emergence of a more sustainable economy.
These investors must still accept it. Because the first impact criterion is neither the method nor the result of the measurement, but the reality of the intention. The willingness to invest in such a way as to generate positive impacts, by agreeing not to blindly follow market indices, to take an active approach to investment and commitment, to reallocate capital. In other words, the first step is to ensure what is the “intentionality” of the investor.
(Featured Image By Markus Spiske)
First published in latribune, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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