Investors need to link impact to value creation
Institutional investors should not measure investment impact in isolation or they run the risk of a disconnect between their intentions for a sustainable economy and the ability to deliver it, according to a sustainability study by Thinking Ahead Institute.
The research found that investors often neglected a translation of the outcomes of the measurement of their impact into value they create for stakeholders, an exercise that should also include future expectations aimed at helping investors make informed decisions regarding the deployment and stewardship of their capital.
- In response to that, the Institute’s working group created a scorecard to monitor value creation activities and a four-step self-assessment framework to identify potential areas of improvement which would include the following:
- Identify who the key stakeholders are and understand their expectations and needs in order to determine what is valued;
- Align organisational purpose with the desired outcomes by understanding which stakeholders the organisation prioritises;
- Identify gaps between current practice and desired norms that align with the organisation’s beliefs and value systems, evaluating these systematically through tools such as questionnaires and scoring systems; and
- Openly discuss the results and gaps to develop an internal action plan.
“Investment has long been seen as a two-dimensional problem of optimising risk and return. In reality it’s always been three-dimensional: investment also impacts the world around us. We believe managing impact improves risk and return outcomes, therefore using this framework will help investment organisations address all three together and effectively communicate their overall value added,” Marisa Hall, co-head of the Thinking Ahead Institute, said.
“Leading asset owners are now looking to measure, manage and report on the social and environmental impact of their investments. We believe the TAI framework will help asset owners as they continue to develop their approach to sustainable investing, by providing the crucial link between measuring the impact of their investments and understanding the value created for stakeholder,” Louise Lew, head of sustainability for Willis Towers Watson Australia, added.
AUTHOR
Oksana Patron
Recommended for you
Global X has painted a worrying picture for active ETFs in Australia, with investor adoption proving uneven and the popularity of its low-cost index counterparts only growing stronger.
Australian equity ETFs attracted record inflows of $3.2 billion in 1Q25, while heightened volatility led to a decline in flows for global equity ETFs, according to Vanguard.
The failure of a clinical trial by biotech firm Opthea has caused shares in its backer Regal Partners to decline 52 per cent year-to-date and hit its funds under management, quarterly flows show.
GQG Partners has revealed its quarterly flows for the first three months of 2025 were up 5.8 per cent, after a difficult final quarter of 2024 as a result of institutional redemptions.
