GIIN Conference 2022 - Rounding up the round ups

Attending the first major impact investing Conference since the pandemic, we came away energised by the conversations and what we see as the great, yet mostly still untapped potential for innovative finance. This was the first true gathering of impact investors at scale.1,500 attended.

Having spent most of our time at the water cooler rather than in the plenaries, breakouts and other sessions, we nonetheless wanted to learn from others what key developments in the broader impact investing field were reported by leaders in the sector.

Here follow a dozen or so key takeaways from the round up of reports, augmented by a few of our observations:

• From a systems change perspective, climate and gender/diversity lenses should be integrated in every investment.
• It is insufficient to decarbonising an investment portfolio, rather we need to articulate the ESG business case for corporates to transform their value chains and create broader decarbonisation in the economy.
• Big blind spot is the tension between the E & S in ESG. Large unemployment rate that the transition to a greener economy will generate. Apart from investing in green infra and tech, need to re-skill the workforce.
• The megatrends attracting the source of capital at scale, being health, education, climate. Another sector piquing investors’ interest is food systems investing – such as alternative proteins. There’s a growing belief that the way we produce and consume food needs deep innovation to fight climate change.
• It’s often been assumed that impact-linked would become the norm among all impact fund managers but it is meeting some resistance linked to reasons of perception and challenges in implementing.
• Ownership models including employee ownership initiatives, which grant company share options to portfolio companies’ employees, have several impacts for the company and the workforce It is “a meaningful economic incentive” for employees’ performance;
• Funds which employee ownership initiatives are increasingly favoured by investors as “a meaningful economic incentive” for performance and to align incentives The Ford Foundation is seeking fund managers that are “25 percent diverse-owned”
• Said carbon markets currently present authenticity and reliability issues, such as the permanence of carbon removal. Both investors have set net-zero 2050 targets
• Public market funds are claiming to deliver impact, albeit this risks adding to the existing confusion around terms such as sustainable investing, socially responsible investing and ESG. There is a determination to make sure impact in public equity helps reinforce the notion of impact investing, rather than abandons its core principles. The GIIN foresees great growth in this market, alongside fixed income.
• Corporate interest in investing for impact is ripe to take off and GIIN and others are looking to highlight the growth of the space via deployment of corporate venture funds, treasury assets and other means.
• Emerging market fund managers are proving they’re possible in markets many mainstream investors deem too risky.
• Critical gaps in the impact ecosystem remain, including small business financing in emerging markets, climate adaptation, and women-led funds.
• Climate has become the key impact focus area for institutional investors.
• Disagreement on notions of impact linked carry - a ‘must-have’ for some impact investing funds, for others too problematic to implement.
• Building impact talent across an institution is essential to deploy large amounts of capital effectively.
• Other sustainability areas such as biodiversity and regeneration need more attention than they have received to date. Regeneration may be the buzzword of the conference.
• Our sector has not yet developed the targets for maintaining long-term biodiversity goals.
• Impact management continues to evolve. The chatter among many attendees included the impending arrival of the EU SFRD Article 10 and its burdensome reporting requirements.
• Some asset owners suggest giving up altogether the use of market-rate, risk-adjusted benchmarks for making decisions about their impact portfolios.