Modern portfolio theory consists of two key elements: risk and opportunity. Day after day, asset managers across the world search for the optimum mix of these two factors. In an age dominated by the fight against climate change, social upheaval and, not least, the coronavirus pandemic, more and more investors are broadening their investment horizon. They are asking themselves what impact the allocation has on the world. "Impact investing has emerged as a significant opportunity to mobilize capital into investments that target measurable positive social and environmental impact alongside financial returns," explains the International Finance Corporation (IFC). Investors frequently turn to the sustainability targets defined by the United Nations for some form of guidance. In 2015 the UN adopted a total of 17 Sustainable Development Goals (SDGs). Among other areas, they cover the fight against poverty and hunger, good healthcare provision, high-quality education, gender equality and measures to protect the climate.
In 2019 the Global Impact Investing Network (GIIN) published its first estimate of the size of the global market for impact investments, revealing that 1,340 organisations around the world held a total of USDbn 502 in such assets under management. According to the GIIN, the analysis amply illustrated the huge diversity of the segment. The list of committed investors extends from classic asset managers through family offices and foundations to banks and pension funds (see graph). Amit Bouri, co-founder and CEO of GIIN, reckons the segment has enormous momentum: "Week after week, leading businesses both large and small are entering the market for impact investing." This young industry would profit from support from governments, science and business leaders. As it happens, politicians are increasingly discovering the issue for themselves. The European Union would like to make sustainability an integral part of its financial policies. Among the areas Brussels is working on are directives for how companies can report the influence of their activities on the climate and the consequences of global warming for their business. At the same time, the EU Commission is planning standards for what are known as "EU Green Bonds".
With all the spirit of optimism, the sector needs to stay true to its original idea. "We need to be sure those making impact investments remain committed to driving intentional and measurable impact," emphasises GIIN CEO Amit Bouri. Daubenthaler & Cie. has signed up to precisely this aspiration. Social responsibility and engagement are part of the DNA of this independent asset manager. "We are committed to ensuring that financial products, too, are geared more towards the common good," the Stuttgart company explains. To that end Daubenthaler & Cie. has just launched the BeneFaktor family. These are financial products of a new generation: instead of being subject solely to standard investment classifications such as ESG, impact or sustainability, the BeneFaktor concept combines targeted investment in a matter of the heart with the possibility of doing good. "BeneFaktor products democratise philanthropy and impact investing," as Daubenthaler & Cie. succinctly puts the idea.
To enable investment in the concept, indices are launched. Each benchmark picks up on a socially relevant future theme, with the focus being on the goal of actually effecting positive change. The index therefore covers only investments oriented to the mission. Such a procedure is known as mission-conforming. In concrete terms, a positive filter is applied in the selection process: only companies which are seriously and credibly engaged with an issue and attempt to solve a problem effectively can be included. The concept deliberately operates with neither a negative filter nor a best-in-class approach. This means that a share cannot be included purely because the company addresses a particular problem better than its competitors. As soon as a BeneFaktorIndex® is mapped via a financial product, philanthropy comes into play, with the issuers donating a fixed part of their fee. However, investors do not have to bear higher costs than with conventional products, because the proportion donated is funded entirely by the parties involved. It always goes to a recognised charitable organisation that serves the investment theme. Essentially, the BeneFaktorIndex® begins where most financial products end: instead of minimising harm, the innovative concept is geared to effecting positive change.
Source: Daubenthaler & Cie. As at: May 2021
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