The next stage in
Impact investing is about funding solutions to help make the world a better place in a measurable way, while making an investment return from these solutions. The impact investment market is substantial and growing. According to the Global Impact Investing Network’s (GIIN) 2020 annual survey, the market for impact investing now stands at $715 billion.
We define impact investing as investing in companies that are growing because their products and services are delivering innovative solutions to society’s underserved needs.
“What impact investing does better than any other form of investing trying to solve the considerable issues facing the environment and society today is align that market-based incentivisation motive with the broader non-financial problems that need fixing.”
– Tim Crockford, Head of Regnan Equity Impact Solutions
Whatever asset class investors allocate to, whether it is public equities, like Regnan Global Equity Impact Solutions, debt or private equity, amongst others, impact investing is made with the explicit, ex-ante intention to generate a positive impact alongside a financial return. Companies or projects they invest in must have an underlying mission – to achieve a positive impact on society and the environment. Impact investors look for credible proof that these companies or projects are generating the positive impact that they claim, and that these positive impacts are not cancelled out by negative impacts, which may, for example, arise within their operations.
Investors identify positive impact solutions in many different ways, but we believe that one of the most comprehensive, evidence-based list of problems to be solved are the United Nations’ set of 17 Sustainable Development Goals (SDGs). They are a list of global ambitions designed to create prosperity for all, but in a way that protects the planet and its natural resources.
We also believe that impact investors need to be engaged investors, especially within public equities. Rather than solely relying on their portfolio companies, impact investors are accountable for delivering a positive impact themselves. They therefore need to take an active role in trying to influence company outcomes for the better.
The capital spectrum – from traditional investment to philanthropy
Regnan Global Equity Impact Solutions
Aiming to generate market-beating long-term returns by investing in solutions to the world’s environmental and societal problems
Launched in October 2020, Regnan Global Equity Impact Solutions is a high conviction, diversified, global multi-cap portfolio with very low turnover and a strong emphasis on driving impact through engagement. Our experienced four-person impact investment team aims to generate long-term outperformance by investing in mission-driven companies that provide solutions for the growing unmet sustainability needs of society and the environment.
Regnan’s impact investment team uses the 17 United Nations Sustainable Development Goals (SDGs) and their 169 underlying targets as an investment lens.
Our taxonomy takes the most pressing global environmental and social problems and links them to the solutions sold by companies today. We believe that by analysing these solutions our taxonomy allows us to identify companies with a strong chance of producing market-beating long-term returns.
We use a rigorous approach to testing the potential of each of the solutions to deliver a large-scale impact. We do this by formulating a Theory of Change and looking at the expected total addressable market for each of them.
17 global goals:
the United Nations Sustainable Development Goals
In 2015, world leaders agreed to 17 global goals, known as the UN Sustainable Development Goals (or SDGs).
Click on each SDG below to find out more.
Five years on the United Nations is calling for significant new investment to address the SDGs.
In 2019 the UN called for “a decade of ambitious action” to deliver the goals by 2030. There’s an estimated gap of $US2.5 trillion to $US3 trillion per year to achieve the SDGs in developing countries.
But the potential dividends of that investment are significant.
Achieving the SDGs could open up $US12 trillion of market opportunities and create 380 million new jobs, the UN believes. Action on climate change could result in US$26 trillion worth of savings by 2030.
A “fundamental shift in the international financial system is needed to align global economic policies and financial systems with the 2030 agenda”, UN Secretary-General António Guterres said in 2019.
“National policy frameworks are key to reducing risks, creating an enabling business environment, incentivising investment in public goals and aligning financial systems with long-term sustainable development.”
A growing set of solutions
Regnan has identified more than 150 solutions and an investment universe of some 2,200 listed companies. These numbers are growing as our new global equities impact investment team benefits from the deep experience of our Engagement, Advisory and Research experts. From this universe we choose companies with the best potential for share price growth based on their innovative and effective SDG solutions.
Health & Wellbeing
Improved life expectancy and quality
Transforming the energy system to power a low-carbon economy
Resource efficiency, reusability and recyclability
Low carbon transportation
Sustainable food supply and productive farmlands
Access to quality education
Financial Services for underserved populations
reservation of and access to water
We aim to achieve positive impact by:
Keeping companies on mission
We engage with management to influence strategy and try to keep them focused on business areas that contribute to solutions.
Engaging to reduce negative impacts
We talk to the management of portfolio companies about issues such as the environmental footprint of their supply chains and working conditions in their suppliers’ factories. By reducing negative impact, we aim to magnify total net positive impact.
We invest in companies we believe should outperform the market in the long term. Assuming we retain our initial conviction, sometimes this means accepting underperformance in the short term, because the management prizes long-term potential over the next quarter’s earnings. Our support, as a long-term investor, increases the company’s ability to stay impactful.