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Impact Investing

IPE special report May 2018

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ESG roundup: Impact investing, Climate Bonds Initiative on solar assets

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  • ESG roundup: Impact investing, Climate Bonds Initiative on solar assets

GLOBAL – With the help of strong UK and EU policy support, impact investing – where a measurable social and/or environmental impact is generated alongside a financial return – is developing rapidly across the investment community and all economic sectors, according to a report by the UK Sustainable Investment and Finance Association (UKSIF).

The report, called 'The Future of Investment: Impact Investing', shows that impact investing involves a range of different investment vehicles, from loans and equity to bonds.

It also highlights the opportunities and supporting regulatory regimes for impact investing in the UK.

The report presents regulatory and other barriers to the sector and lessons, which the UK can take from abroad, along with expectations of significant sector growth over the next 5-10 years.

UKSIF chief executive Simon Howard said: "While impact investing may not be considered conventional investment practice today, our panellists argue that it might be in 10 years' time.

"If they are right, it may mean significant changes in some institutional portfolios and perhaps whole new types of retail investment emerging.

"The different motivations that drive this activity – from cost-cutting by government to belief driven by personal experience – and the expectations that market-level returns are possible from certain impact investments justify the growing sophistication of opportunities already apparent."

The report features industry leaders from Big Society Capital, Bridges Ventures, ClearlySo, Investing for Good, Social Finance, Triodos Bank and Worthstone.

In other news, the Climate Bonds Initiative has issued proposed eligibility criteria for solar assets under the Climate Bond Standard and Certification Scheme.

The criteria are added to those for wind energy to become the second batch of eligible assets for bond certification.

Climate Bonds chief executive Sean Kidney said: "Solar energy seems like a straightforward fixed asset to include in our definition of a low-carbon economy.

"But we needed an expert working group to address questions around potential environmental impacts, fossil fuel back-up and supply-chain manufacturing to make sure we have all bases covered.

"Certification will be most useful for utilities and banks looking to issue corporate bonds where the proceeds are then allocated to solar assets.

"Solar eligibility criteria confirm assets that can be counted in pools qualifying for Climate Bonds labelling. The rest of the Climate Bond Standard provides assurance for investors around the proper use of proceeds."

Matthew Hale, managing director and environment executive at Bank of America Merrill Lynch, said: "This will be a very useful tool for us to apply with bond-issuing clients who want to be recognised for their contribution to a low-carbon economy."

The project has received funding from the Bank of America Foundation.

The first set of criteria released by the working group for public consultation relates to fixed assets for solar power generation or for transmission infrastructure to deliver such electricity.

The criteria specifies the amount of non-solar fuel back-up or hybridisation allowed for projects such as concentrated solar power plants at 15%.

Criteria for manufacturers in the solar supply chain will follow in the autumn.

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