October 3, 2019 / 8:27 PM / 2 months ago

'Empty promises' could pop bubble of investing for good

AMSTERDAM, Oct 3 (Thomson Reuters Foundation) - Investors in projects that do environmental or social good said on Thursday that their burgeoning industry’s reputation was at risk because they could not measure their impact.

The $500-billion impact investment industry - from green energy schemes to homeless services - is growing rapidly as wealth shifts into the hands of women and millennials who want to invest with a purpose beyond profit.

But its rising popularity has seen companies overstate the positive impact of their ventures in a practice known as “impact washing”, said experts at the Global Impact Investing Network (GIIN) summit in Amsterdam on Thursday.

“The risk is that people are branding themselves as an impact investment to attract new investors but in reality nothing changes,” said Marilou van Golstein Brouwers, former chairwoman of the investment arm of Dutch ethical bank Triodos.

“It’s about trust, ultimately, and if there are too many products with empty promises then our reputation is damaged and it backfires,” she told the Thomson Reuters Foundation on the sidelines of the conference.

As impact investing gains popularity, it is coming under greater scrutiny and mounting pressure to develop global standards through which impact can be properly assessed.

Currently, money managers set their own standards to assess the impact of investments, which creates confusion.

“I think it’s very dangerous if you get different regulations,” said Maria Hakansson, chief executive of Sweden’s development bank, Swedfund, which requires companies it invests in to agree on an action plan that it monitors for progress.

“That’s why it’s so important to look at this as a global industry and (to establish) what the requirements for standards are ... Ideally it would be like accounting standards,” said Hakansson, whose bank invests mainly in Sub-Saharan Africa.

Impact investors fear regulators may impose rules that do not work in their favour if they fail to regulate themselves.

The European Commission, the European Union’s executive arm, has proposed new rules for deciding what makes an investment green, which will come into force in 2022.

“We are potentially at the point where there’s going to be something that pops,” said Matt Christensen, global head of responsible investment at AXA Investment Managers.

“I’d like to think that several of the mechanisms we’re trying to put in place right now – be it impact principles, regulations breathing down our back in Europe, or the initiatives through reporting collectively - might avert the need for a full blown crisis,” he said. (Reporting by Karolin Schaps. Editing by Katy Migiro and Sarah Shearman. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, women’s and LGBT+ rights, human trafficking and slavery, property rights, social innovation, resilience and climate change. Visit http://news.trust.org to see more stories)

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