Key takeaway points were:
- One panellist said their team follows the Impact Management Project’s methodology for dividing the universe of public companies into three categories: A, B and C. These range from – Avoiding harm (A) to Benefiting stakeholders (B) Contributing to world-changing positive solutions (C). They aim to have a C impact element in their holdings.
- Another highlighted that the largest public companies equate with the richest markets. On that metric, they said you could argue that Tesla is probably the biggest company tackling climate change. But buying Tesla is not the most direct way to address this issue.
- It was possible to do impact in public markets, but the perception is that private markets are easier. For its clients, one panellist said they first started impact investing in private market sectors such as renewable energy. They also noted the difficulty of meaningful engagement with publicly quoted companies as a secondary investor, where you have limited influence and recourse.
- Nevertheless, they recognised that more people are attempting impact in public equity while maintaining a broad opportunity set. It was a tough balance, estimating that filtering in “real impact” companies reduced the universe very quickly.
- Another panellist estimated there were 28,000 companies in Emerging Markets; but after getting down to those potentially suitable in terms of high quality, low cyclicality and benefiting from sustainable domestic demand growth, less than one thousand were left.
- They saw three drivers for expansion in that number: growth in affordable healthcare provision, digitalisation, and climate-change mitigation.
- There are plenty of enterprises that score highly on ESG criteria, i.e., ‘Bs’ or contributors to SDGs. They are not, however, providing services or products tackling the world’s biggest challenges.
- On the SDGs, one panellist described them as a good common language, used by lots of companies and people in the industry.
- A final point was that the world had become wrongly obsessed with portfolio’s carbon footprints. The argument was that first, the data are not very good, and second, it is much more important to focus on the impact of a company’s products to help the economy reduce overall emissions than it is to focus on the operating footprint.
- Carbon emissions should be viewed and analysed more holistically. Some industries that are large emitters today also play an important role as solution providers that can eventually help get the world to net zero in 2050.
