How Do Socially Inspired Investment Themes Differ And Why Is That Important?

Same Same, But Different

a phrase perhaps commonly heard in Thailand meaning similar enough but still not the same, requiring more questions and examinations. Diversity training tool.

Socially Inspired Investing is not as easy as it looks.

Aside from the technical or quantitative aspects, is the personal desire to avoid or minimize certain areas of concern on the values side – and that makes it extra demanding. There is no right or wrong – it’s just personal!

If it were easy, everyone would do it and if you look at the proliferation of “ESG” offerings by just about every investment house in recent years you might just come to that conclusion. But these investments are not all the same and we thought it would be helpful to examine the different kinds of social investing through the insightful comments of our brilliant contributors and a fascinating Podcast with our guest Gabe Rissman – Cofounder and President at YourStake.

Be it SRI, ESG, Impact Investing, etc. know that these are all different. And yet, in many cases, investment firms many times irresponsibly use these terms almost interchangeably. Even the U.S. Securities and Exchange Commission has felt it necessary to step in – putting the investment community on notice that they must do a better job of educating investors. 

What do the ratings really mean and is that all you should consider. How perfect can you get, or not get, trying to elevate your portfolio to align more with your personal values and concerns. Perfection is elusive and subjective – must that be the requirement? Some things to think about.

Enjoy this next edition of The Socially Inspired Digest and Podcast. It’s been fascinating for us. Feel free to pass it along.

How Do Socially Inspired Investment Themes Differ And Why Is That Important?

We reached out to leading experts in SRI and ESG to find out their responses, and this is what we found…

QUESTIONHow do Socially Inspired investment themes differ and why is that important?

ANSWERTonderai Leonel Njowera, Civil Engineer, Sustainable Finance, Strategy and Risk Analyst

ANSWERSocial investment themes differ in materiality, asset classes such as education, health, agriculture, water supply and sanitation, either of both climate change adaptation or mitigation, to name a few. This can be either in terms of investment technology or even investment in a particular social asset class or even non-investment. For example, there will be investment in social housing in some geographies, and non in other, or the level of healthtech/edutech will be lower in one region than the other.

ANSWERThese variations are key because they allow contextual investment, which allow real social challenges to be addressed through relevant asset solutions, putting investment resources of time, money and human capital, to efficient and effective use.

QUESTIONHow do Socially Inspired investment themes differ and why is that important?

ANSWERLiana Le, Energy Transition Analyst and Niklas Huppmann, Business Strategy at Kayrros

ANSWERESG or socially inspired investments not only allow finance socio-ecological progress but also create long-term interest and contingency to ultimately move key issues at the core of political and economic considerations. As different issues become more apparent through events and disasters, having separate themes allow for a more effective allocation of funding to drive change in an organized way. The process begins with policy and trickles down to the cause itself. For example, with the pressure of climate change rising and the influx of sustainable investments following — whether through government organizations or third parties backed by large firms, new policies are made throughout the value chain. This top-down approach makes it so that money is not the only incentive — and stakeholders not only can take a hedging position in the short term but trust it will make an actual impact in the long run. 

QUESTIONHow do Socially Inspired investment themes differ and why is that important

ANSWERPersia Navidi, Partner, Hicksons Lawyers

ANSWERSocially inspired investment themes are becoming more and more prevalent and differ from other themes in that they focus on and consider the core of all businesses – their people. Why are they important? They are, arguably, the way of the future. Companies who fail to address issues such as diversity and inclusion, social justice and the “people” element of business may risk falling behind because investors, insurers, consumers, employees, clients and the wider community seek more transparency and evidence of socially inspired action and investment. While it may be difficult to define, assess and measure the “S” in ESG, we are increasingly seeing company directors and their insurers recognise the significance of socially inspired investments, leading to proactive steps being taken to measure and invest in this space.