You cannot take impact seriously without considering emerging markets (EM). They make up 85% of the world's population and cover 77% of its land mass. The need for impact capital to combat climate change and improve social inclusion is huge; 70% of people in emerging economies are reliant on fossil fuels and EM produce over 75% of the world's carbon emissions.
Achieving the United Nations Sustainable Development Goals remains a major global challenge and requires capital from long-term investors where change is needed to benefit people and planet within a just transition framework.
But are there actually credible investment opportunities to achieve impact? Or is impact-washing rife?
And do you have to pursue a purely philanthropic approach, or can you combine financial returns and positive impact in a single strategy?
Insight Investment believe the emerging markets offer huge scope for positive environmental and social change and are ripe with opportunities to help with this transition due to the size of the universe (c. $4 trillion of hard currency debt outstanding). However, pension funds still have a duty to pay pensions and, as we enter a period of a higher inflation and rates increases, emerging market corporates offer the highest duration-adjusted yield anywhere in fixed income, with EM green bonds yielding 2% more than developed market green bonds, for only half the duration.
Insight Investment discussed:
Simon is an emerging market corporate debt Portfolio Manager in the Emerging Market Debt Team, with a particular focus on responsible investment and high yield. He is lead portfolio manager for Insight's environmental, social and governance (ESG) strategies in emerging markets and global high yield, and a portfolio manager on other emerging market corporate strategies. Simon joined Insight Investment in 2011 as a Credit Analyst, spending six years covering high yield and emerging markets before moving to the Emerging Market Debt Team in 2017. He began his career in audit and corporate finance at Grant Thornton. Simon holds a BA in history from Durham University, is a Chartered Accountant and CFA charter holder.
Paris Alignment Forum
The Paris Alignment Forum was established by Pensions for Purpose to help pension funds and other asset owners on their journey towards alignment with the goals of the Paris Agreement. We do this by sharing climate-related thought leadership written by our Influencer members (asset managers, consultants and lawyers), by running free training workshops for trustees and by engaging in industry-wide conversation through our quarterly all-stakeholder and asset-owner events.
To join the Paris Alignment Forum please email Karen Shackleton.
Impact Investment Adopters Forum
The Impact Investing Adopters Forum is a member forum of pension funds, investment consultants and fiduciary managers at the forefront of sustainable finance. Adopters have committed to the Impact Investing Institute’s Impact Investing Principles – and advancing the impact investing agenda. The forum is run by Pensions for Purpose in partnership with the Impact Investing Institute to advance the principles, share best practice and encourage more pension funds to invest with a positive social and environmental impact.
To join the Impact Investing Adopters Forum please email Charlotte O’Leary.
Pensions for Purpose
Pensions for Purpose exists as a bridge between asset managers, pension funds and their professional advisers, to encourage the flow of capital towards impact investment. Our aim is to empower pension funds to seek positive impact opportunities and mitigate negative impact risks. For membership information, please email Charlotte O’Leary.