Over the years, socially responsible investors have sought to align their values and beliefs with their investment decisions. The choice of investment was largely limited to Socially Responsible Investing (SRI) equity funds. In recent years, this approach has evolved to include other types of investment that achieve a positive impact on the world, while also meeting the required return and risk characteristics.
L&P has devoted considerable resources to building client portfolios that exhibit strong prospective returns for the risk taken, while also achieving a significant positive impact. We believe we are among the leading global firms in constructing portfolios that achieve strong impact without sacrificing investment returns.
Measurement is at the heart of impact investing. What doesn’t get measured doesn’t get managed. For impact investors, knowing exactly how their money results in benefits to society and the planet is a top priority. This need for transparency regarding impact disclosure led us to produce our first impact report, which will be released later this year. This endeavours to measure the impact that a typical L&P client portfolio has on the environment and society.
In our impact analysis, we integrate the United Nations Sustainable Development Goals (SDGs), and present details of how each investment meets various SDGs. The SDGs are a set of 17 goals agreed by all UN member states. They address the world’s most pressing social and environmental problems such as poverty, biodiversity loss and climate change. In aggregate, investments within our clients’ portfolios help to address all 17 of these goals; this is a measure of the extent and breadth of the impact achieved by our clients.
One of the key issues addressed by our clients’ portfolios is climate change. The science is undeniable; the world needs to reduce its dependence on fossil fuels for energy if we are to avoid the worst effects of climate change. In 2017, the majority of our clients strengthened the fossil fuel free criteria in their ethical and impact policies, and as a result hold no fossil fuels in their portfolios. Moreover, carbon emissions generated are approximately half that of a standard balanced portfolio of equities and bonds. When the effect of investments in “carbon sinks”, such as forestry, is taken into account, the carbon footprint of the portfolio is negative. In other words, a typical L&P client portfolio is removing more carbon from the atmosphere than it is releasing. This is the essence of impact investing: to achieve a positive effect while producing strong risk-adjusted return on capital. It demonstrates to other investors that investment performance and impact can be achieved simultaneously. This creates a virtuous circle where strong returns catalyse greater investment, which lowers costs and thus promotes further investments, all while generating the desired positive impact.
The transition to a low carbon economy, which is currently underway, will not be possible unless the world increases the output of renewable energy. L&P clients produce 160 times the renewable power of an average charity portfolio and have supported renewable power projects from their early days.
Investing to tackle poverty and social inequality is a further area of focus for our clients. Through their investments, hundreds of thousands of underserved people across the world gain access to financial services and basic needs such as water. Examples of measures used in our report include employment generated per €1m invested, litres of clean water produced and livelihoods impacted. Social metrics can be more difficult to identify and quantify than others, such as renewable energy output or carbon emissions. This challenge has led us to work closely with investment managers in order to understand complex social problems, how they can be addressed and what social impact data should be collected and reported. The ultimate goal is to move towards standardised social measures that can be compared across similar investment propositions.
We continue to develop our expertise in the field of impact investing, both internally and in partnership with our network of industry and investment professionals. Collaboration is a key element in this endeavour and a powerful tool for the advancement of sustainability goals.
In June 2017 Cantor Fitzgerald Ireland acquired L&P Group, an international consultancy specialising in ethical investment management, and stewardship services. The typical L&P long term portfolio is fossil fuel free, generates over 30 times the renewable energy of a regular portfolio and has carbon emissions of one third of a regular portfolio, with plans to soon reduce this to zero. All of this is achieved while earning a strong investment return.
To speak with a Portfolio Manager or Account Executive today, please phone the Cantor Fitzgerald dealing desk on 01 633 3633.
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