ESG Topics

Key environmental, social and governance topics

Thematic investment; e.g. green investment; impact investment

Thematic investments and its sub-sets mean selected investment in companies with a commitment to chosen responsible business products and/or services, such as environmental technologies. 

Thematic such as green investment: Applying a thematic approach to investments is intended to capture long-term opportunities from structural trends such as environmental change, demographic shifts or technological advances. Thematic investment can be applied across all asset classes; equities, debt, PE, property. Thematic investments target companies and assets with high exposure to a specific trend or activity. Examples of themes include “green” investment (for example renewable energy, green transport, green buildings, resource efficient manufacturing, climate-smart agriculture). Taxonomies such as the EU Green taxonomy and the South African Green Taxonomy may provide a framework for further standardised information in the categorisation of thematic strategies.

Impact investment: Impact investment is Investment strategies providing capital to companies, organizations, and funds working to generate positive E&S impact alongside a financial return. 

The Global Impact Investing Network (GIIN) definition of impact investing which has been adopted by the structured network of 13 organisations convened by the Impact Management Project (IMP) consider impact investing to be intentional, measurable, with social/environmental alongside financial return across asset classes and across spectrum of risk return ranging from commercial to sub-commercial. 

Impact investments can be made in both emerging and developed markets, and target a range of returns from below market to market rate, depending on investors’ strategic goals. The growing impact investment market provides capital to address the world’s most pressing challenges

in sectors such as sustainable agriculture, renewable energy, conservation, microfinance, and affordable and accessible basic services including housing, healthcare, and education. 

Pension funds that wish to include impact investments in their portfolios should seek to understand how their managers define impact and how they seek to measure such impact. One problem facing the industry is the branding of certain funds as impact investments without a clear link to end results. It is therefore vital that pension funds help to maintain the integrity of the market by choosing products and funds that genuinely deliver positive impacts.

Case study – the example of pension investment in truck stops in South Africa 

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