A dashboard developed by CISL's Investment Leaders Group, including PIMCO, Union Bancaire Privée and Zurich Insurance provides metrics to assess corporate social and environmental impact. Terry Slavin reports
Cambridge University’s Investment Leaders Group has developed a framework that allows investors to measure the impact of their investments against the Sustainable Development Goals.
The Investment Leaders Group (ILG), a global network of pension funds, insurers and asset managers convened by the Cambridge Institute for Sustainability Leadership (CISL), has created a dashboard, called the Cambridge Impact Framework, that uses existing data to help the industry assess funds against six themes derived from the 17 SDGs: resource security, healthy ecosystems, climate stability, basic needs, wellbeing and decent work. The dashboard uses a traffic light system to categorise impact from very negative (red) to very positive (deep green).
The report proposes both ideal and base metrics for each of the six SDG themes, so that fund managers can make the first stabs at measuring impact, while the industry tries to come up with better metric over the longer term. Both sets are intended to provide objective, comparable, consistent and reproducible results.
Dr Jake Reynolds, executive director at the Cambridge Institute for Sustainability Leadership, and lead author of the report pointed out that getting an accurate measurement of social and environmental impact was not just a question for impact funds, which have a desired social or environmental impact. “All investment has impact, and arguably it’s more important to discover what the impact is of a fund when it is very conventional. This goes right across the capital mix.”
Union Bancaire Privée (UBP), one of the members of the Investment Leaders Group, stress-tested the framework on its newly launched Positive Impact Equity fund, a portfolio of 25-35 stocks of companies that “address the world’s most pressing environmental and societal challenges”.
Victoria Legett, head of impact investing at UBP, said: “There is building momentum from our client base for a product like this.”
Legett said she had feared that the dashboard would flash red in most categories, but on well-being and basic needs, the fund was in very positive territory, in decent work it was positive, while it was neutral for healthy ecosystems, and negative for both resource security and climate stability.
She pointed to the huge gap between the ideal metrics and those that can be practically used today to measure impact in the dashboard.
“It’s not a silver bullet. It’s not a complete solution. We are just not there as an industry yet. But it is a really exciting shift and in making a start we are creating hopefully a platform, and from this platform we can both advocate for improved disclosure and at the same time give clients something that is practical and comparable right now.”
Johanna Koeb, head of responsible investment at Zurich Insurance, said the framework would help with its target, set in 2017, of doubling its impact investment to $5bn of its $200bn under management. Zurich has a goal of improving the lives of 5 million people a year, and saving 5 million tons a year of CO2 equivalent emissions.
She said the framework would help Zurich footprint its investments for positive and negative impact “looking at what the underlying assets are doing and the traces companies leave in the world, including their climate impact”. Until now, she said, it has not been easy. “But by using the framework we can move into that space with much more clarity.”