Pension fund consultants have been standing in the way of greater adoption of impact investment by their clients, it was argued at a conference yesterday.
Katherine Garrett-Cox, member of the supervisory board at Deutsche Bank and former chief executive and chief investment officer of Alliance Trust, said pension fund consultants were “a roadblock that needs to be broken down”.
She later said not all consultants were “dreadful” and there were “some enlightened ones”.
David Scott, chairman at Tribe Impact Capital, an impact-focused wealth manager, argued that trustees needed to take more responsibility and challenge consultants. Fiduciary duty was about the financial return and societal impact of investments, he added.
In the past impact investing was seen as a trade-off between achieving positive non-financial outcomes at the expense of financial performance. Many in the field now argue it can encompass market-rate returns.
Sapna Shah, director of strategy at the Global Impact Investing Network (GIIN), said it was important to be able to present convincing data demonstrating financial performance in certain impact products. It would also be helpful to clarify where on the spectrum of impact investing these products lie, she said.
Garrett-Cox said longer track records for impact investing vehicles would also help, and recommended that investment managers compare their performance against mainstream benchmarks to attract consultants’ attention.
It wasn’t only about the role of consultants, however: language was also seen as a barrier.
Garrett-Cox said: “We’ve had one panel, one conversation and I’ve heard multiple phrases – ESG, impact investing, SRI – and I think part of the problem around the demand side is that it’s very confusing what you’re actually saying when you talk about this.”
Ultimately it was about “good long-term investment management”, she added.
Gavin Wilson, CEO at IFC Asset Management Company, said the current regulatory framework, designed to promote financial stability, was impeding the flow of capital to developing countries and hampering the achievement of the UN Sustainable Development Goals (SDGs).
“We have narrow regulations in the insurance, pension fund, and banking industries that impede broader global objectives,” he said.