A bi-weekly publication from Consultiva Internacional, Inc. (Registered Investment Adviser)
Darren Walker, CEO of the Ford Foundation recently spoke about the challenges to impact investing at the 2016 Mission Investors Exchange conference. As summarized in an Institutional Investor article, Walker criticized the Foundation’s own investment policy, which seeks to maximize returns to provide grants and program related investments under the IRS mandated pay-out for private foundations. As many investors and advisors signatories to the United Nations Principles for Responsible Investments know, endowments should be considering the impact that their dollars have upon the world in which they invest. Walker and others are pushing to get Foundation investment offices to inject values into their investment approach. As signatories to the UN PRI we educate our clients on this topic also.
Impact investing means bringing into focus social, environmental and governance (ESG) aspects to investing, in addition to economic returns. It has become popular among investors who understand that capital markets can be used to tackle societal issues, but Walker was quick to acknowledge that many still are reluctant to take impact more seriously because they consider it as “oppositional to core investing”. At Consultiva we have also witnessed discussions where responsible investing has been branded as unsound, and that it means sacrificing returns. Industry leaders however, are proving otherwise. The MSCI USA ESG index is a good example; it’s a capitalization weighted index that provides exposure to companies with high ESG performance. It consists of large and mid-capitalization companies in the US market, and as seen in Graph I below, performs at par with the non-ESG index. In practicality, this means that a mutual fund following the index would probably perform as well as a fund mimicking the MSCI non-ESG index.
Impact investing vehicles are found across all asset classes, including alternative investments. There are private equity and venture capital funds that can provide impact in the shape of business development and job creation. In Puerto Rico, we will see an investment opportunity like this take off very soon and it will be presented during community reinvestment week the second week of October. We trust our Island can also benefit from the impact of well-placed private capital investments.
by Myrna Rivera, CIMA®
Founder & Chief Executive Officer
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