We take a look at the report and bring you its highlights and key themes.
This year’s report focuses on the opportunity to build back better in a post-pandemic world. IFA Magazine readers can access the full 2020 report via the link shown at the end of this article and below we bring you the main points of the report by way of a summary.
A clear vision
When it comes to the investment process used for the Positive Impact Portfolios, EQ’s vision is driven by their view about what the world would look like when everyone invests for positive impact. But what does that really look like?
Throughout 2019, EQ enhanced its impact investing standards and continued to identify how its investments support the United Nations’ Sustainable Development Goals – the global framework for action to solve the most urgent and challenging needs of society and the environment. The team has also collaborated with a wide variety of stakeholders to enhance its engagement efforts.
The 2020 report highlights how using a positive impact approach can drive value creation, in the sense of both maximising financial returns and societal impact. In addition, the positive impact approach extends beyond the traditional investor, attracting a higher proportion of female investors (52%), than the UK average (44%). There’s also a clear appeal to younger investors shown by the breakdown of existing investors in the portfolios.
What’s new in this year’s report?
There are many aspects for advisers and paraplanners to review. Examples of what’s new are:
- How companies in the Positive Impact Portfolios are helping to fight the coronavirus today and set the stage for a green economic recovery.
- An in-depth focus on climate change, using scenario analysis to show how investments are aligned to the Paris Agreement.
- Details on how EQ has enhanced its engagement efforts to maximise its impact. Key impact highlights saw an increase in the impact made per £1m invested, including:
- 352 tonnes of CO2 avoided: equivalent to taking 77 cars off the road.
- 25 tonnes of waste recycled: equivalent to 26 households’ waste.
- 202MWH of renewable energy generated: equivalent to 61 homes’ usage.
- 178m litres of clean water provided: equivalent to 1,404 households usage;
- 402 hours of school, higher and adult education delivered.
Getting down to detail
As you would expect, the report contains a portfolio x-ray section, giving detail on how the investment portfolio is aligned to the UN SDGs and how the fund selection and asset allocation processes are carried out with a longer term outlook firmly front and centre. It is clear that the Coronavirus pandemic has given added impetus to the drive to “build back better” when it comes to portfolio management. The report looks at key areas of interest such as sustainable cities, water management, waste and recycling and green bonds.
The carbon footprint
Limiting the worst effects of climate change requires the rapid decarbonisation of our economies. This year, EQ has partnered with Urgentem, a leading carbon analytics company, to see how the Positive Impact portfolios align with a low carbon future. Whilst the portfolios are already well aligned to a lower warming scenario, the managers intend to further reduce the emissions intensity of the portfolios over time, ensuring that they stay aligned to a low-carbon future.
Engaging for change
While the first part of the report largely highlights how EQ invests for positive impact, the second part looks at the other way they make a positive impact by engaging for change. Investors can influence companies by engaging directly with management teams and by using voting rights to raise expectations and advocate for strategic positive change. The team at EQ believes that it is vital that they hold their underlying fund managers to account, so they in turn hold their investee companies to account – in a wider mission to improve sustainable impacts and long term returns over time.
The bigger picture
More broadly, the report shows how EQ have been working on different ways to make a positive change and how these can and would impact the portfolios.
One of these is climate action, where work has been undertaken to understand how fund managers are currently integrating climate risk into their investment and stewardship activities as well as their internal business operations.
Another area is health and nutrition, where engagement with relevant fund managers was based on a thorough research report on UK food retailers by the organisation Access to Nutrition Initiative. Specific areas under the microscope here are childhood obesity and how the coronavirus pandemic is further underscoring the importance of a healthy society.
Others relate to diversity and inclusion, whereby EQ have joined the UK Women in Finance Charter and also to sustainable supply chains and encouraging fund managers to push for best practice within their investee companies.
Damien Lardoux, Head of Impact Investing at EQ comments: “The coronavirus pandemic has reset the global economy and public opinion has shifted. There is now much wider acceptance that we need to invest in solution providers now, in order to create a future world for the benefit of all.”