Helping pension funds break down the barriers to impact investing
This global collaboration facilitated knowledge sharing on helping pension funds break down the barriers to impact investing.
Globally there were universal barriers to the growth of impact investing identified by the working group:
Lack of awareness and commonality in understanding of impact investing.
Concerns and misperceptions around fiduciary duties.
Lack of evidence on financial returns.
Lack of capability to support key features of impact investing e.g. impact measurement.
Potential solutions to overcoming the barriers to greater impact investments include:
Breaking down myths of fiduciary duty and impact investing.
Apply the following fund principles: set impactful objectives; review and hire consultant managers aligned with those impact objectives; stewardship, use your voice to make change; manage and review impact; supplement with measurement principles.
Having a universal understanding of what impact investing is.
Greater measurement of the impact of externalities.
Greater evidence of financial returns and case studies of impact investments.
Benchmarking of funds and institutions on their impact.
The following resources explores potential solutions to overcoming the barriers to impact investing.
Impact Investing Good Governance Principles for Pension Trustees (Impact Investing Institute, 2020).
Impact investing by pension funds: Fiduciary duty – the legal context (Impact Investing Institute, 2020).
The Financial System Benchmark will rank the 400 most influential financial institutions on contribution to the Sustainable Development Goals (SDGs) (World Benchmarking Alliance, 2021)
The Impact Investing Adopters Forum: a member forum of pension funds, investment consultants and managers.
Sustainable Investment: Best Practice Disclosure Checklist for Pension Funds (World Bank Group, 2020).
Institutional Investor Study (Schroders, 2020)