Listed equities have a bigger role to play in impact investing as it can scale with growing investor demand, according to a white paper by UK-based sustainability investment house WHEB.
Released in Australia by Pengana Capital, the white paper challenged the assumption that secondary markets, such as listed equities markets, were inappropriate for impact investing because there was frequent changes in ownership and uncertainty over investors’ intent to drive positive change.
But a traditional view of impact investing would mean impact investing could only apply to a few niche types of investment, according to the white paper.
“Impact investing would be restricted to philanthropic activity or, at most, to situations involving new capital invested in markets with very poor liquidity,” the white paper said.
“In remaining niche, impact investment would inevitably fail to deliver positive impact at the scale that is required.”
According to the white paper, listed companies helped satisfy the global increase in impact allocations and were a natural fit for the strategy due to their reporting and compliance demands.
“Listed companies are subject to disclosure regulations and governance requirements that far exceed those in private markets,” it said.
“These facilitate public scrutiny and access by small and large investors alike.
“Consequently, impact investing as a philosophy in listed markets can attract more – and more widespread – support than private markets which remain the preserve of large private investors.
“In order to have big, global impacts, you need big global companies, matched with big global markets.”
Adam Myers, Pengana Capital head of distribution, said impact investing could continue to evolve and become more powerful.
“We’re seeing more listed companies having a positive impact, and more equities investors want to know their investment capital is having impact,” he said.
“The improved transparency and liquidity of listed equities is a positive for impact investing. To paraphrase the white paper, we need the scale from big global companies to have a big global impact and achieve meaningful change.”
