Impact investing – strong momentum, strong returns

Investors in funds are looking for opportunities to deploy their capital through investment professionals who have the appetite to tackle some of the biggest issues in society, such as education and job inequalities, access to healthcare and climate change.

The dynamics of making a positive societal impact through private equity investment are constantly changing.

At the Rainmakers Conference in Manchester, the Rainmakers for Good panel set out their priorities and thinking.

Paddy Dowdall, assistant director at the Greater Manchester Pension Fund, said: “Everyone who lives and works in Greater Manchester is a stakeholder in the fund. We’re looking to provide long term returns for them.

“Many years ago, the council’s board of trustees decided that they wanted to have investments with twin aims – to invest locally. They got a QC’s opinion as to whether or not their fiduciary responsibility would be affected by this, and the opinion helpfully said it wouldn’t, as long as it wasn’t a detriment.

“Essentially, it’s got to be commercial returns. The key point here is that we’re not the lender of last resort, we want to invest to get a return.”

Lucie Mills, NorthEdge’s value creation and ESG partner, believes there are many positives to a twin approach.

“How we pitch what we do in an ESG perspective to our investors, but also to our portfolio: it is not mutually exclusive to strong returns,” she said.

“We fundamentally believe that if you do the right thing, for things that are material to your business, you will attract a broader range of people that are interested in that business. And ultimately, we will deliver better returns for our investors.

“We really see ESG – if you focus on it in the right way – as an enabler.”

Despite some signs of a step back in America, Palatine’s sustainability director Stephanie Wall is confident that there is still strong momentum on this side of the Atlantic.

She said: “What we have seen in the UK and in Europe is that investors are still really engaged, and more so than ever.

“We’ve had been doing ESG for 14 years – so, way before it was cool – but we’ve always been on the front foot with our investors and demonstrating the positive outcomes that we’ve achieved as a result of engaging our management teams on ESG.

“But there’s a lot more that we’re getting back now. I think there’s a lot more sophistication, a lot more maturity within the LPs, and it’s really nice to have that engagement back from our investors as well.”

Zara de Belder, associate director, transactions and sustainable finance at Anthesis, highlighted the breadth of due diligence that now takes place.

“We now do things like climate risk screening, human rights assessment, supply chain, workplace culture,” she said.

“That really helps actually establish a baseline and get a clearer sense around how management teams are thinking about ESG, what type of governance processes they’ve got in place.

“As the ESG landscape has evolved so much, it’s about being able to make sure teams have the right knowledge, the right skills, and the internal resource to help deliver on that strategy. It’s really part and parcel of the whole sustainability transformation journey.”

Sharon Cooper, head of organisational culture and development at Inclusive Employers, added: We can put the plans in place, we can gather the data, we can do all the analysis. But I think it’s about recognising that each organisation is individual, it has its own culture and its own way of working.

“It’s making sure that the interventions that are in place are representative of that organisation.

“How do we stop it being box ticking? Leadership buy-in is essential to this, but it has to be communicated consistently and well.

“If things aren’t going well, be authentic about that, and have those honest conversations and reset.”

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