EQ Investors, the B Corp Wealth Manager, has recently published its fourth annual impact report. IFA Magazine talks to EQ Investors’ Senior Sustainability Specialist, Louisiana Salge, about the methodology which the report is based upon and why she believes it helps to boost clients’ engagement with their investments.
For nine years, EQ Investors (EQ) have been managing its range of Positive Impact Portfolios. These portfolios operate with a dual mandate, aiming not only to maximise financial performance for a given risk profile but also to maximise the positive impacts on society and the environment.
We start the conversation by asking Salge to give us a brief overview of the what the EQ Impact Report is all about, how it relates to the portfolios and to shed some light on the aims they have for issuing it.
She explains “This is the fourth edition of our Positive Impact Report. In it we show the quantified environmental and social benefits linked to clients’ investments in our portfolios and also how we have driven real change over the past year.
“When it comes to asset allocation, we use the UN Sustainable Development Goals (SDGs) as a framework for understanding where the impact needs to go. That’s how we allocate capital and how we engage for change with the underlying portfolio holdings.”
Transparency is also key to the process. Salge comments “it’s clear to us that with the dual mandate we operate, it’s not just about us reporting the financial returns to investors, we need to be reporting on the impact returns too. That’s where this annual report really delivers.
“It’s an interesting mix. As well as being an educational resource aiming to bring together the process behind how we invest, it also reports on the impact deliverables. In this way, clients know what’s been achieved in terms of the impact of the investments made within their portfolios. It’s a great way to showcase what we do day to day and how we manage the money whilst really bringing it to life for our clients.
“For us, we believe that this is exactly what our clients want as it helps them to really connect with their investments on an ongoing basis.”
EQ works with a number of adviser clients too. The impact reports are ideally placed as a resource for advisers’ use too as Salge comments: “for our financial adviser clients, they want an investment approach which their clients can fully understand, can buy into and know that they are secure with it as it ensures that their underlying preferences for sustainability are met.”
The impact report has evolved over the years into this latest edition. Taking a big picture view on the report’s aims, Salge comments “we use it to raise awareness that everybody can be investing in line with their values and everybody can understand how they can make a positive impact on society and the environment through their investments.”
At EQ, undertaking strong research is a crucial part of the investment process. According to Salge, the impact report is far from being a stand-alone document. She comments “all the analysis that is summarised in this report is used on a day to day basis by our portfolio managers. Our team carries out a vast amount of bottom-up research on the funds we invest in. This really helps us to get down to the detail we need to ensure we build and manage our clients’ portfolios so as to maximise returns as well as the positive impacts associated with the investments we make every year. I believe that the urgency of the climate crisis makes our Positive Impact strategy more relevant than ever.”
Theory of change
We then move on to talk about the underlying methodology which is used by the EQ team in managing the Positive Impact Portfolios.
For this first time, this year’s report explains the ‘theory of change’ framework which the team uses. Giving some detail on this Salge comments, “this framework is how we build our impact metrics and assess the impact of each investment towards the UN Sustainable Development Goals (SDGs). We have been evolving it over the years and it appears in the report for the first time this year. It is a framework that we use across different sectors in order to connect an intended outcome – aligning with the UN SDGs – with precursors, ie the various outputs, outcomes and activities that have led to this.
“This approach is important as it determines where we invest clients’ money and what types of companies we want to select and include. It’s an in-depth method and the impact reporting sits within the outputs and outcomes arenas.”