Families make resilient impact investing returns but progress needed in evaluating social performance

Families generally agree with new Campden Wealth research which reveals impact investments delivered “solid financial returns” in 2020, despite Covid-19 disruption, but say more progress is needed in making robust the measurement of positive social change.

The families, foundations and individuals surveyed for the Investing for Global Impact: A Power for Good 2021 report told Campden Research their impact investments their returns met (60%) or exceeded (19%) expectations. Of those surveyed, 80% said investors did not have to forfeit financial returns for impact. In addition, 36% said they engaged in impact because they believe incorporating sustainability considerations into investments will lead to better investment returns/risk projections, up considerably from 24% in 2020.

The report found the pandemic had helped focus the majority (52%) of families’ traditional decisions on investments with value-creating environmental, social and governance (ESG) considerations even if they were not directly impact investing.

Family business next-gen Melissa Sesana Grajales (pictured below) agreed sustainable investments in general had exceeded expectations at her privately held impact investing firm Asiri, headquartered in Bogota.

“Both direct investments in social enterprises and in ESG funds performed well,” Sesana Grajales said.

“In the case of social enterprises, primarily in Colombia, there were needs that had to be met and opportunities arose for companies to expedite their digitalisation or make pivots towards more social/environmental thematics. This is not to say that all social enterprises survived, but those who did certainly had their thesis of ‘doing well and doing good’ validated.”

Dilhan C Fernando (pictured below), next-gen chief executive of tea maker Dilmah, said the Sri Lankan family business’ investment in sustainability had also met their expectations, “although I must add that our investments are primarily in technology that help our core and ancillary businesses to strengthen their sustainability. The market does not always reward good behaviour where sustainability is concerned.

“A persisting emphasis on the discount culture regardless of the social and environmental impacts of that focus on price makes it difficult for many businesses to implement the changes to plant, machinery and process that sustainability requires. Fortunately, the emerging concept of true pricing and much greater sensitivity of consumers to the concept is likely to deliver change for the better.”

Giorgiana Notarbartolo (pictured below), a London-based impact investor and entrepreneur, said the report’s claims of resilient impact returns did not surprise her, “as impact ventures typically want to address the most pressing issues.

“In a time of crisis, we focus on what really matters and those ventures tend to address those burning issues,” Notarbartolo said.

“They did in certain case exceeded and generally meet my expectations.”

Almost all respondents told Campden Research they believed progress has been made in relation to the sophistication of impact measurement/management practices (98%), the availability of professionals with relevant skills (93%) and data on investment products/opportunities (92%). However, the top three challenges sustainable investing families perceived to face in the coming five years include: an ability to demonstrate social/environmental impact (45%), greenwashing (42%) and not having a common language to describe impact performance (38%).

Asked if such progress has been made in her experience, Sesana Grajales said what was central to her was the availability of third-party verification of an impact event.

“This transparency used along with metrics will clear a lot of the green washing out,” she said.

“There are a few companies doing this already, such as Proof of Impact which provides a number of tech solutions to maximise both impact and financial returns.”

Fernando said communicating social and environmental impact was difficult with rhetoric too often going beyond reality.

“While there is some improvement in the regulatory mechanism, greenwashing continues with the loudest media voice having the possibility to influence acceptance of their position,” he said.

“Too often the communication is disproportionate to the impact. That is a tragedy although customers have greater ability today than before to see through insincere claims. The lack of a common yardstick is an issue that needs resolution.”

Notarbartolo said she thought the results were “a bit optimistic”.

“We have definitely seen an improvement, but the number of different measurement system and approaches is still source of a lot of concern for me and of lack of clarity within the industry,” she said.

“More skills and skilled individuals have joined the ‘movement’, but as all this knowledge is still very much in-becoming, I find it very hard to find very skilled and expert individuals in the space. I agree opportunities are on the rise yet how many pf these are really having an impact?”