15 June 2018
To combat the inertia, confusion and scepticism around impact investing, stakeholders looking for financial returns and those interested in non-financial returns have to find a common language, according to Elizabeth Corley, Allianz Global Investors (GI) vice-chair and former CEO.
Talking at the PEI Responsible Investment Forum the day after the UK social impact investing implementation taskforce held its first conference, Corley, who chairs the taskforce, reflected on the divide between the different stakeholder communities.
“230 people showed up to our conference yesterday,” she said. “And you could split the room between those who were in the financial sector, those who passionately believe in impact [investing] and those who were on the fence.”
On the financial side everyone was talking about data, track records, benchmarks and proofs, Corley continued, and on the other side they were talking about outcomes, benefits and good.
“We have to define ways of talking together in a common language,” she said.
In late 2016, Corley was asked by the UK government to form an advisory group on growing a culture of social impact investing.
By the end of 2017, the advisory group released a definition of impact investing as the “investment in the shares or loan capital of companies and enterprises that not only measure and report their wider impact on society – but also hold themselves accountable for delivering and increasing positive impact.”
Simultaneously, the advisory group released what it coined as ‘the spectrum of capital‘ - a chart laying down the different types of investments: from the traditional financial return orientated investments through to the ‘do no-harm’, or responsible, investments and finally through to sustainable investment where the investor holds itself accountable.
“What we are trying to do with this spectrum is break the mindset which is that there is a trade-off between financial and non-financial returns,” Corley said, admitting she was often sceptical when speaking with someone who had a ‘theory of change’.
“Their theory of change is ‘if I make this intervention I will make society better’. But when I ask them what the outcomes look like, they talk to me about society getting better and in the back of my mind is ‘yes but what does it mean for my portfolio’,” she said.
Based on the definition and spectrum of capital, the advisory group made 53 recommendations to the UK government, who responded by asking Corley to set up a taskforce to take these recommendations forward.
The taskforce was formed in March of this year and is working on its progress report to be published at the end of June. A taskforce representative told Insurance Asset Risk it hadn’t been decided yet if that initial report will be made public.
The final public report is expected to be published at the end of this year.