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Special Report

Impact investing

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ESG roundup: Social impact fund, integrated reporting, FRR, EIRIS

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Liechtenstein-based LGT Venture Philanthropy (LGT VP) and private bank Berenberg have announced the first close of their social impact fund, Impact Ventures UK (IVUK), after raising £20.8m (€24.8m) from investors.

Investors in IVUK include the London Borough of Waltham Forest Pension Fund, Deutsche Bank via the DB Impact Investment Fund, Stichting Anton Jurgens Fonds and The Golden Bottle Trust, in addition to the cornerstone investment of £10m from Big Society Capital

IVUK will invest in enterprises that create strong positive social impact for disadvantaged people and communities in the UK, as well as generating a financial return.

The fund has a broad mandate and will invest in companies with business models that target specific areas of impact, ranging from education, housing, employment and skills through to access to finance, as well as mental and physical health.

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In other news, the International Integrated Reporting Framework (IR) has been released, following a three-month global consultation led by the International Integrated Reporting Council (IIRC), which collected more than 350 responses from every region of the world. 

IR applies principles and concepts that are focused on bringing greater cohesion and efficiency to the reporting process, and adopting integrated thinking as a way of breaking down internal silos and reducing duplication. 

It aims to improve the quality of information available to providers of financial capital to enable a more efficient and productive allocation of capital. 

IIRC chief executive Paul Druckman said: “The Framework brings technical rigour and cohesion to a process that has grown organically and through market pressure over the last three years. 

”Today, we have fired the starting gun on a period of global adoption that will begin in early 2014 by showcasing practical examples of reporting innovation, including how businesses are demonstrating value creation using the ‘capitals’ model and principles such as the connectivity of information.”

The framework will be used to accelerate the adoption of IR across the world, where it is currently being trialled in more than 25 countries, 16 of which are members of the G20.

Meanwhile, French reserve fund Fonds de réserve pour les retraites (FRR) has selected responsible investment research specialist EIRIS to analyse the extra-financial risks of the FRR’s global equity portfolio, including small and mid caps and its corporate fixed income portfolio.

EIRIS will assess the portfolios against the norms and principles enshrined in international conventions for corporate involvement in anti-personnel landmines, cluster munitions and biological and chemical weapons.

It will also assess the portfolios against governance criteria.

Research will be undertaken annually and the results provided to the FRR’s Responsible Investment Committee.

Shale gas fracking, meanwhile, has a hidden impact on climate change, according to a report by the Environmental Integrity Project (EIP), namely the unleashing of a tidal wave of construction or expansion of more than 90 chemical, fertilizer and petroleum plants that will release about as much greenhouse gas pollution as 21 large baseload coal-fired power plants.

Since 1 January 2012, companies have proposed or already obtained 95 Clean Air Act permits authorising a 91m tonne increase in greenhouse gas emissions for the construction and operation of new compressors, pipelines and other major facilities made possible by cheap shale gas.

The climate implications of the new sites are considerable, says the report.

For example, nitric acid units at fertilizer plants release large amounts of nitrous oxide, which has a global warming effect more than 300 times that of carbon dioxide.

Proposed new liquefied natural gas (LNG) terminals will release about as much greenhouse gas as would a new coal plant.

The total of 91m additional tonnes of GHG pollution does not include new emissions from proposed gas-fired power plants or the multitude of smaller wells, gas processing plants, compressor stations and flares springing up across the US in shale-gas rich states like North Dakota, Pennsylvania and Texas.

The EIP report can be found here.

However, professors Richard Muller and Elizabeth Muller argue in their paper ‘Why every serious environmentalist should favour fracking,’ published by the Centre for Policy Studies, that air pollution can be mitigated by the responsible development and utilisation of shale gas.

The authors consider some of the concerns raised by opponents of fracking and conclude that they are either largely false or can be addressed by appropriate regulation.

Fugitive methane emissions, in particular, can and must be mitigated – but the impact of even the highest estimates of these emissions are far below that of coal emissions on global warming.

Developed economies should, therefore, help emerging economies switch from coal to natural gas, and shale gas technology should be advanced as rapidly as possible and shared freely.

The Mullers conclude that environmentalists should recognise the shale gas revolution as beneficial to society – and lend their full support to helping it advance.

The paper can be found here.

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