Impact investment performance – a UK asset owner & investment consultant perspective

Our latest Pensions for Purpose Impact Lens paper, co-sponsored by Aquila Capital, AXA Investment Managers, Baillie Gifford, Franklin Templeton, Resonance and Vontobel Asset Management, explores impact funds' allocation and financial performance.

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Our report seeks to show the financial performance of impact funds under the generally accepted definition of impact investments: investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return. The research compares impact funds’ performance with the broader universe to establish whether ‘impact investment’ does indeed meet trustees’ fiduciary duties to deliver the best risk-adjusted returns over time.

DATA COLLECTION

We gathered investment performance data from 17 asset managers with UK pension fund clients, based in either Europe or the US, collectively £18.6bn in impact assets under management (AUM).

The objective of the data collation was to dispel the myth investing with an intentional impact goal alongside financial return is detrimental to performance. The data collected covered listed equity, bonds, private equity, real estate and infrastructure funds across a number of different geographies.

Additionally, we interviewed six UK pension funds and four investment consultants for qualitative analysis to supplement our performance data findings.

We reviewed the cumulative average performance of impact funds in each asset class, since inception, and compared this to an appropriate benchmark that would be a close proxy for measuring performance for a non-impact fund.

INVESTMENT PERFORMANCE RESULTS

The cumulative investment performance results are consistent with academic research, which suggests there is no reason why impact funds should not achieve competitive risk-adjusted returns compared to conventional funds.

To the extent that anything in this report constitutes a financial promotion it is exempt from the general prohibition in S21 of FSMA on the basis that the report is only intended for investment professionals as such term is defined in S19 of the Financial Promotions Order. Please note that Pensions for Purpose does not provide consultancy services, advice or personal recommendations on any of the investment opportunities mentioned in this research. We collaborate on research projects with our members, we do not endorse any underlying funds.

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