Impact Investing is a term used to encompass investing approaches that seek to achieve both a financial return and a societal contribution. This is a rapidly evolving field - which recognizes that many investors seek to meet their return goals, while also aligning their investment portfolio with the holistic purpose of their organization.
One of many challenges in this space has been the plethora of terminology used to refer to the various approaches that investors could pursue. In the past, terms like Mission Related Investing (MRI) or Socially Responsible Investing (SRI) were popular while more recently Environmental, Social and Governance (ESG) factors or Sustainable Investing has been prevalent. The commonality among all of these approaches is that there is a clear intention with the investment which exists alongside the financial return objective. Some would say there is a dual objective to both “do good and do well”.
NEPC differentiates the impact market into three primary options:
For nearly 30 years NEPC has worked closely with our clients to understand their missions, return and risk objectives, spending, and liquidity needs. Many of our faith based clients were early adopters in the Impact Investing space – today, we have more than 50 clients pursuing Impact Investing across our client base, and even more considering it.
NEPC’s Impact Investing Committee is responsible for analyzing trends in this space, researching impact-focused managers and working with clients to develop strategies that meet their needs. This Committee is comprised of consultants and research professionals across both traditional and alternative asset classes.
NEPC was one of the first US-based consulting firms to become a signatory to the Principles for Responsible Investment (PRI). The United Nations-supported PRI has quickly become the leading global network for investors to publicly demonstrate their commitment to this field, to collaborate and learn with their peers about the implications of environmental, social and governance (ESG) issues, and to incorporate these factors into investment decision making and ownership practices. NEPC became a signatory to the PRI largely as a reflection of the work we were already doing related to impact investing. Aligning client portfolios with their respective missions is integral to the advice we provide.
NEPC has worked with a wide variety of clients to create and implement impact investment programs. We help our clients identify managers who have strong track records in the implementation of impact investing mandates and are active in company engagement and public policy work. Since much of this work is customized to each client’s goals and investment opportunities may be ‘niche’ investments, the evaluation approach is unique. Accordingly, we take a hands-on approach when these opportunities arise in order to ensure institutional quality investment opportunities or, in some cases, work with the manager to help better structure the investment opportunity in order to meet institutional standards.
The key drivers of a successful impact investing program are the willingness of investors to work in partnership with their consultant and investment managers, and the ability of investors to learn from their experiences and adapt their programs to new information and offerings. NEPC welcomes the opportunity to work with you on developing or expanding your Impact Investing program. Please contact us to discuss your objectives and how we can be of service to your organization.