Investors increasingly want to invest where their money makes a difference. Fortunately, the regulatory landscape in the EU is helping them make more informed decisions. Both the Green Taxonomy and SFDR are bringing more clarity and discipline to the investment process. Evidence-based analysis is replacing the unsubstantiated claims of clever marketing campaigns.
Whilst new EU standards and regulation are helpful, there is still much confusion around ESG, with a growing body of ratings providers using different methodologies and data sets and arriving at very different conclusions. We hope very much that there will be a more standardised approach and that the correlation between different providers’ ESG ratings will become more robust and reliable.
There is a fundamental difference between ESG and Impact investing. We like to characterise ESG as being about behaviours on a journey, whilst Impact describes the outcomes at the destination. Investing through an ESG lens doesn’t, unfortunately, seem to offer investors much choice beyond the familiar names – excluding oil and tobacco – which would normally be offered in a global equity portfolio. Investing to make a positive impact on jobs, lives, communities and the environment offers a more purposeful role for capital. We believe this will be more appreciated in the coming year.
The true benefits of Socially Responsible Investment, come not from buying listed equities in the secondary market but by deploying fresh capital to build sustainable real assets. Given the focus and energy seen at COP26 in Glasgow, investors will increasingly demand tangible results rather than just marketing spin. Making a difference cannot, by definition, be business as usual.
The key theme for 2022 will be to ensure a sustainable economic recovery, providing secure well-paid jobs in those sectors – energy, infrastructure, transport, communications and welfare – which play a vital role in building resilient communities and societies.
In a world where we are seeing more barriers and borders erected, it will also be important to think holistically about our one and only planet. We cannot, in Western Europe, simply outsource the multiple negative consequences of climate change to somewhere else in the world. Closing polluting manufacturing plants at home simply to rebuild them abroad is no solution. We must address climate change at source, coming together with global solutions which go beyond national borders.
Our firm hope is that 2022 will be a year of new direct capital investment. A year of the real economy, real jobs, and real change. Our Energy Impact Trust recently launched on the London Stock Exchange is proof that the concept resonates with investors. ESG most definitely matters, but we believe that impact – investing with a purpose – matters even more.
This research document is issued by ThomasLloyd Global Asset Management GmbH, Hanauer Landstraße 291b, 60314 Frankfurt am Main. The information contained herein is proprietary and is intended only for use by the recipient and may not be reproduced, distributed or used for any other purposes. This document includes future-oriented statements, which are based on current estimates, forecasts, and expectations. These statements include risks and uncertainties, since many factors affect the estimates, forecasts, and expectations. Actual results and development may therefore vary from the current assumptions. Past performance does not guarantee and is not indicative of future results. There can be no assurances that the countries, the markets, or the sectors will perform as expected. The information contained herein has been compiled to the best of our knowledge, and is subject to change without notice. No liability is accepted for the accuracy of the details at any other time. The information contained herein is not complete and does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Clients should consider whether any conclusion in our research is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice. This document is not intended to be, nor should it be construed or used as, an offer to sell or to solicit any offer to invest in any investment vehicle. In no case should these materials be considered as a recommendation to buy respectively, sell securities, futures contracts nor any other form of financial instrument. By receipt of this docu- ment, you declare your agreement with the preceding terms.