A few months ago we asked our audience an important question: do you know the net impact of your investments? (Spoiler alert: many don’t, but the post covers why you should!)
Over the past year, we’ve been asking our institutional investors across Canada something similar: what kind of impact are your institutional investments having on the world?
Making a positive institutional net impact is an important goal and success metric for many institutions — whether educational, environmental, community-oriented or global. And financial impacts can play a big part in achieving that success. And yet many institutions continue to approach investing from a more traditional standpoint — focusing solely on returns.
Now don’t get us wrong: returns are critical to an effective institutional investment strategy. But we know from experience that you can achieve so much more than that with impact investing.
Just ask Makeway, a national charity and public foundation (formerly known as the Tides Canada Foundation), which has included impact as a core goal in everything they do — including their investments. “We have been ESG and fossil free for many years, and we believe our investments should align with our purpose, which is to support community-led solutions that will have a global impact,” says Chris Little, director of finance at Makeway.
Little has been working with Genus to push the needle on the foundation’s impact investing efforts. “We’ve been moving our portfolio from a more traditional one to an ESG screen portfolio, and even further along that continuum into higher impact investments,” she says. “All of our investments are now generating a net positive impact. That’s the vision we’ve set out.”
A Net Impact Score for your investments
Our newly released Institutional Portfolio Net Impact Score Ranking Report 2020 has revealed that, much like Makeway, many Canadian institutions are aligning their investments with their goals to influence the positive changes they want to see in the world — both by screening out negative impact investments from their portfolios and by focusing on making positive impact investments — the kind that support companies working toward solutions to critical global problems.
To help them along, we’ve developed our Institutional Portfolio Net Impact ScoreTM, which measures both the positive and negative impacts of public equity investments, resulting in a single, overall score.
Instead of focusing only on positive impact investing or—conversely—screening solely for negative impact, the Net Impact Score provides a holistic view that helps the investor account for the destructive nature and the beneficial nature of their investments in one metric.
Our impact scoring is based on the United Nations’ 17 sustainable development goals, which range from eradicating poverty and hunger, to reducing climate change and supporting responsible production and consumption.
By applying Net Impact Scoring to an institutional investment portfolio, impact investors can ensure that their portfolio creates an overall positive impact. For example, an institution that invests in renewable energy in one part of their portfolio in order to reduce carbon emissions can rest assured that they won’t negate that benefit by simultaneously investing in a coal utility company in another part of their portfolio.
Amplifying institutional net impact
For its part, Makeway focuses on four key impact areas when it comes to its institutional investments and beyond, says Little: “sector influence — how do we influence other foundations to move the dial on impact investing and become involved; partnerships in innovation — we worked with Genus on developing a customizable donor-advised impact fund; growing the impact investing ecosystem through program-related funds — we launched a shared platform supporting Northern Indigenous communities; and lastly, how to better leverage our assets for impact — we worked with Genus on transitioning to its high impact equity fund.”
“In 2020, our impact investments have been extremely resilient in the face of market volatility.”
Chris Little, Director of Finance, Makeway Foundation
Makeway is now working with Genus on developing impact reporting, to make it easier to measure financial impact against its overall goals. “You don’t want your investments working against your work on the ground,” Little says. “Amplifying impact is really critical.”
LIttle offers the following tips to institutions looking to embark on a journey of impact investing: “It’s not a very linear journey,” she says. “It took us a bit of time to work with the team and with our board to get to the clear vision of what we mean by impact and where we want to go,” she adds, “but once we had clarity, we could move forward while keeping it fairly flexible.”
Learn more about our institutional impact investing services or contact us to chat about a personalized plan tailored to the impact you want to make in the world.
It’s Time to Think More Holistically About Your Financial Legacy – and Its Impact on the Future
