This impact investment training session explored the question: How can you optimise your investment portfolio to integrate impact into your risk-return considerations as well as enhance your shareholder value using ESG data and tools? 

We know that demand for environmental, social and governance (ESG) data and tools continues to grow, with tailwinds coming from changing investor preferences as well as regulation. In this Pensions for Purpose Impact Investing Adopters Forum session, Fulcrum Asset Management introduced the key benefits for and use case studies of the newly launched ESG for Investors platform.

This platform can make a positive, novel contribution to the ESG debate, leveraging academic rigour to help investors achieve real-world impact. It can equip users with tools that allow them to have an immediate impact with regards to engagement, stewardship and portfolio optimisation.

Key areas of focus in the session

1. A focus on opportunity rather than risk

ESG research often focuses on downsides, such as quantifying the costs of future regulation and the magnitude of potential stranded assets. Instead, the platform chooses to focus on opportunities and is therefore likely to appeal to a broader suite of investors, not just those sustainability-minded. This pragmatic approach is more likely to resonate with corporate decision-makers and investors, by focusing on ESG improvements that research shows are valued by the market.

2. A focus on the most material issues

ESG topics are vast and at their limit they are a ‘wish list’ of everything that could be improved in the corporate arena. Unfortunately, though, not all ESG themes are quantifiable and linked to the bottom line. This platform combines academic research and statistical analysis to identify a combination of eight E, S and G factors that have the highest potential to improve shareholder value.

3. Combining risk-adjusted returns and impact: the next efficient frontier

Investor interest for ‘traditional’ impact investment in the public domain continues, with regulation putting more emphasis on quantifying and addressing the positive and negative societal impacts associated with mainstream funds. A suite of “3D portfolio optimisers” can help investors find an efficient frontier between maximising their impact (e.g., supporting the companies taking strong steps to reduce their carbon emissions) and minimising unintended consequences (eg. correlations between asset classes that can negatively impact diversification).

The training was followed by 15 minutes of Q&A, moderated by Charlotte O’Leary of Pensions for Purpose. 

Learning outcome

Prioritising engagement and optimising capital allocation, defining and implementing an ESG policy and collaborating to raise market standards.

Who was this event for?

Anyone involved in the governance of pension funds or other asset pools at a Trustee Board or executive level either as a decision-maker or as a practitioner.

Learn more here