How you invest matters. Social and environmental issues are deeply connected with economic and financial outcomes, which means investors have a unique power to create change. When executed well, impact investing can not only deliver the financial benefits you were expecting, but also create the change you are looking for.
On Earth Day, Mercer joined Stockholm Climate Week for the session Investing with Intent: the Case for Impact.
Mercer was represented by Cara Williams, Global Head of ESG and Sustainability, Silva Hanell, Wealth Leader for Investment Solutions in Sweden, and Max Messervy, Head of Sustainable Investment, Americas. Also joining the session was Dr. Christin ter Braak-Forstinger, Co-founder & CEO of Chi Impact Capital, and Pia Irell, Impact Partner of Trill Impact.
Investing with Intent: the Case for Impact brought global investment leaders from Mercer, Trill Impact, and Chi Impact Capital. (Left to right) Silva Hanell, Cara Williams, Pia Irell, Dr. Christin ter Braak-Forstinger, and moderator Nick Nuttall.
Every dollar you invest could actively deliver a certain kind of good
Many investors already focus on environmental, social, and governance factors to better understand the potential investment risks and identify opportunities. But if you want to go beyond understanding ESG impacts, positive and negative, and invest with intent, you need impact investing.
Impact investing proactively helps dynamic businesses deliver a specific social and environmental benefit, alongside financial outcomes. Or, as Cara Williams put it, “impact investing begins where ESG stops.”
Impact investors connect the pursuit of risk-adjusted returns with the delivery of positive real-world outcomes, often related to the United Nations Sustainable Development Goals (SDGs). Each SDG provides a range of impact investment targets. For example, climate action is a key target that motivates allocations to renewable energy or green buildings. 
Cara Williams said, “As with all investments, the aspiration is to actually have a positive return. Investing with intent is not about philanthropy. There is an actual expected positive return on the backside of impact investment.”
However, investing with intent and knowing where to start your impact investment journey can also be challenging.
“The biggest challenge in the impact space is the fact that the choices out there are so wide that where you [determine to] actually focus has proven to be quite challenging for asset owners. To ensure that asset owners achieve their intended impact, we recommend that they first define what they want their impact to look like. Once this impact is defined, the question arises of how asset owners look to continue developing their portfolio while aligning with their impact objectives,” said Cara Williams, Global Head of ESG and Sustainability at Mercer.
“For example, if you choose to invest in clean water, are you going for it globally? Even in developed markets, such as the United States, we have challenges providing clean water. Or are you going to choose specific markets like in the global south where you feel like that’s a bigger issue?”
“It’s about redirecting investment to the solution and to be a part of the solution, not a part of the problem,” says Silva Hanell, Wealth Leader & Partner, Mercer Investment Solutions, Sweden.
Impact investors come in all shapes and sizes, ranging from institutional investors and fund managers to development finance institutions, foundations, pension funds, and individual investors. Additionally, when it comes to their approaches to impact investing, their strategies can be just as varied – whether it's chasing market rate returns or investing in long-term capital.
Regardless of differing investor profiles and approaches, collectively, impact investing can concentrate efforts towards many specific outcomes into broader, unified goals – using the individual outcomes to drive collected outcomes no investor could achieve alone.
“Investing with intent is very important,” said Silva Hanell. “It starts with including climate in strategic decisions and explaining to the trustees and the people the importance of having an intent. It’s not only about managing an equity risk or credit risk, but also a climate risk.
“We need to stabilize global temperatures on Earth. We are in emergency mode. Everyone needs to invest with intent. Impact investing should be our normal, everyday way of thinking.”
Impact investing: Investing in a sustainable and inclusive future
Climate change is both a pressing issue and an opportunity for the investment community. Institutional investors, such as pension funds, financial institutions, insurers, wealth managers, endowments and foundations, hold trillions of dollars in assets in their portfolios that can be applied towards investment into climate initiatives. By managing these portfolios to avoid climate transition risks, asset owners can reap various benefits, including market, technological, and reputational advantages. When applying impact investing to address global challenges like climate change, it can expedite the just transition and unlock economic opportunities in a decarbonized economy. However, it is critical that impact investments toward climate solutions also take a holistic approach to ensure that communities reliant on carbon-heavy industries are given the support they need to transition to a decarbonized economy. As Max Messervy, Mercer’s Head of Sustainable Investment, Americas explained, “It becomes a question of how to help all these different communities, and it's not just those who are directly employed but also thinking about their families. How can they have access to a secure pension if they have to change jobs or retire early?
“I believe that the private sector has a role to play in facilitating that retraining for workers who’d like to be retrained into different economic sectors and facilitating finding roles for them as well. There could be intentional hiring by, for example, new renewable energy companies or offshore wind developers.”
Max Messervy, Head of Sustainable Investment, Americas and We Don’t Have Time’s Moderator, Nick Nuttall, discusses the various types of impact investors and what sectors are seeing impact investment.
To learn more about Mercer’s work with impact investing, click here.
https://youtu.be/CpRtb1Lz3oU?t=21397
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Very insightful on the impact of investing, a good reminder of the power of money
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This is interesting and very useful. But I’d like to know even more on how we all can contribute - and what we all should avoid not to help the bad guys. Money talks!
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Great to see the issue of climate justice being raised as critical in this context.
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True climate leadership in investing
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This was an informative session I learnt alot
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It was great to learn more about impact investing and what that investing landscape looks like.