Impact investing and fiduciary duty ‘fully aligned’

Pension schemes can meet their impact investing objectives while fulfilling their fiduciary responsibility of maintaining satisfactory financial returns, a research paper by Pensions for Purpose has concluded.

It found that pension schemes investing in impact funds had successfully aligned financial returns with positive social and environmental outcomes.

Pensions for Purpose stated that its paper dispelled the myth that impact investments necessitated a trade-off with trustees’ fiduciary duty of providing satisfactory investment returns.

The research covered 17 asset managers and showcased how impact funds across listed equity, bonds, private equity, real estate and infrastructure had delivered competitive returns in comparison to traditional assets.

These impact investments featured themes of renewable energy (56.4 per cent), energy efficiency (49.1 per cent) and health (40 per cent).

The study found that biodiversity was emerging as an important area of interest, which Pensions for Purpose said indicated a broadening scope of impact investing among pension schemes.

Furthermore, the research showed that impact investments in private markets where impact additionality is achieved, particularly in real estate and private equity, represented a substantial portion of pension schemes' allocations.

The pension schemes surveyed that were already allocating resources to impact investments had committed between 1 per cent and 25 per cent to such solutions, with the majority maintaining a long-term outlook spanning 10 to 30 years.

Expectations were that these investments would meet both financial and impact goals.

Assets owners with a longer history in impact investing reported “satisfaction” with their returns, while those with shorter investment durations presented a more varied response and acknowledged the need for a full market cycle to properly assess performance.

“The findings of our research are important for the pension fund, impact and general investment industries,” said Pensions for Purpose founder and chair, Karen Shackleton.

“The findings validate the compatibility of impact investing with financial performance goals which could have far-reaching consequences on future institutional investments.

“This research paper also serves as a valuable resource for pension funds contemplating impact investing strategies and shows the potential of these investments to contribute positively to society and the environment while meeting fiduciary obligations.”



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