Investors around the world are increasingly focusing on investing with impact to unleash the power of capital in support of positive change. But what benefit is there to investing in the elusive “good” if there’s no practical intention behind what is being invested? Like other decisions in the world, intention and action are of equal importance, and in the case of financial impact, one should not be emphasized over the other. Insert: intentionality.
According to the Global Impact Investing Network (GIIN), intentionality is identified as the first of four core characteristics of impact investing: the other three are using evidence and impact data in investment design; managing impact performance; and contributing to the growth of the industry. Impact investing entails an “intentional desire” to contribute to measurable social or environmental outcomes. The aim to solve problems and address opportunities is “at the heart” of what differentiates true impact investing from other investments that may happen to incorporate impact considerations.
Intentionality represents a line of defense against impact washing, a practice belied by the sometimes-deceptive use of labels like “impact” or “sustainable” without meaningful follow-through on actions, measurements, or outcomes.
In fact, impact washing was perceived by 66% of investors in 2020 as the main challenge for the impact investment industry over the next five years by organizations active in the industry. The second most noted challenge was the inability to demonstrate impact results, perceived as an important challenge by 35% of respondents.
As noted in our article in ImpactAlpha, intentionality is a core component of the equation for Reynders, McVeigh’s impact investing and SRI approaches. The practice relies on identifying solutions to systemic issues and supporting them with financial models based on sound investment fundamentals. In this way, the capital deployed goes beyond “supporting a cause.” It is put to work in replicable, scalable models geared for reliable returns that might be social, environmental, and financial.
The key to impact investing is to view the landscape through a more holistic lens than the finance industry traditionally employed. An investor’s intention to have a positive social or environmental impact through investments is essential. Creating those impactful models should incorporate all the hallmarks of sound traditional investing, and at Reynders, McVeigh, we’ve participated in a range of vehicles that set the stage for positive impact.
To learn more about our impact investing philosophy, check out our latest insight paper: Impact Investing: An Investor’s Perspective.
DISCLOSURES: The views expressed above are subject to change and represent the current, good-faith views of Reynders, McVeigh Capital Management, LLC (“we”) at the time of publication. References to specific impact investments are not intended to be, and should not be interpreted as, solicitations, recommendations, or investment advice. The commentary provided herein is educational in nature. All data is based on current, public information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such.
The reader should not assume that investments in the impact investments, sectors, and/or manners discussed were or will be profitable. Past performance is not an indication of future results. Investment decisions should always be made based on an investor’s specific needs, objectives, goals, time horizon, and risk tolerance.
Certain impact investments are private, non-public offerings that are only available to accredited investors (individuals or business entities that are allowed to trade securities that may not be registered with financial authorities due to their income, net worth, asset size, governance status, or professional experience). These private, non-public offerings may experience greater volatility than traditional investments in publicly traded securities. Advisory clients should carefully review the pertinent documents for each impact investment for a more detailed discussion of the associated risks. Given the high-risk nature of impact investments, advisory clients should contact their portfolio manager to discuss risks and suitability prior to investing.