Solutions for Impact Investors: From Strategy to Implementation

In writing this monograph, our main goal is to provide impact investors with tools to tighten the link between their investment decisions and impact creation. Our intent is threefold: to attract more capital to impact investing; to assist impact investors as they move from organizational change to executing and refining their impact investment decision-making process; and to narrow the gap within foundations between program professionals and investment professionals thereby contributing to a mutual understanding and implementation of a portfolio approach to impact investing.Additionally, we intend to help break down the barriers making it difficult to identify opportunities in impact investing. To this end, we provide examples throughout the monograph and at www.rockpa.org/impactinvesting of impact investment opportunities in most major asset classes.While we understand the important role that impact investors can play in providing financial capital, we also want to acknowledge the wide range of non-financial resources needed to address the world's problems. Our intent with this monograph is not to provide a comprehensive list of investments across asset classes nor any type of investment advice with regard to the selected profiles. We strongly encourage the reader to conduct their own assessment and evaluation for risk and suitability before considering any investment

What is the cost of maximizing ESG performance in the portfolio selection strategy? The case of The Dow Jones Index average stocks

[EN] Portfolio selection is one of the main financial topics. The original portfolio selection problem dealt with the trade-off between return and risk, measured as the mean returns and the variance, respectively. For investors more variables other than return and risk are considered to select the stocks to be included in the portfolio. Nowadays, many investors include corporate social responsibility as one eligibility criterion. Additionally, other return and risk measures are being employed. All of this, together with further constraints such as portfolio cardinality, which mirror real-world demands by investors, have made the multicriteria portfolio selection problem to be NP-hard. To solve this problem, heuristics such as the non-dominated sorting genetic algorithm II have been developed. The aim of this paper is to analyse the trade-off between return, risk and corporate social responsibility. To this end, we construct pareto efficient portfolios using a fuzzy multicriteria portfolio selection model with real-world constraints. The model is applied on a set of 28 stocks which are constituents of the Dow Jones Industrial Average stock index. The analysis shows that portfolios scoring higher in corporate social responsibility obtain lower returns. As of the risk, the riskier portfolios are those with extreme (high or low) corporate social responsibility scores. Finally, applying the proposed portfolio selection methodology, it is possible to build investment portfolios that dominate the benchmark. That is, socially responsible portfolios, measured by ESG scores, must not necessarily be penalized in terms of return or risk.García García, F.; Gankova-Ivanova, T.; González-Bueno, J.; Oliver-Muncharaz, J.; Tamosiuniene, R. (2022). What is the cost of maximizing ESG performance in the portfolio selection strategy? The case of The Dow Jones Index average stocks. Enterpreneurship and Sustainability Issues. 9(4):178-192. https://doi.org/10.9770/jesi.2022.9.3(9)1781929

The Impact of Equity Engagement Evaluating the Impact of Shareholder Engagement in Public Equity Investing

Over the last decade, growing numbers of investors have become increasingly concerned with the environmental and social impact of their investments across asset classes. This trend has recently been driven by new waves of "impact investors" proactively seeking measurable social and environmental impact in addition to financial returns, and by "responsible investors" making commitments to engage on environmental, social, and governance (ESG) issues through initiatives such as the United Nations-backed Principles for Responsible Investment (PRI). At the same time, engaged shareholders have had long-standing experience using "the power of the proxy" and their voices as investors to hold companies accountable for the impacts they have on employees, stakeholders, communities, and ecosystems.While investor interest in shareholder engagement has grown, our understanding of the impacts associated with engagement activities remains largely anecdotal.In 2012, an important study on Total Portfolio Activation provided a new conceptual and analytical framework for investors to pursue environmental and social impact across all asset classes commonly found in a diversified investment portfolio. Building upon the insights of Total Portfolio Activation, the Impact of Equity Engagement (IE2) initiative seeks to deepen our understanding of the nature of impact in one specific asset class—public equities— where investors' engagement activities have generated meaningful social and environmental impacts.Given the large social and environmental footprints of publicly traded corporations and the persistently high allocation to public equities in most investor portfolios, public equity investing presents a major opportunity for impact investing. Yet impact investing, as currently practiced, has concentrated primarily on smallscale direct investments in private equity and debt, where many investors perceive that social and environmental impact can be more readily observed than in publicly traded companies where ownership is intermediated, diluted, and diffused through secondary capital markets.Indeed, the nature of impact within public equity investing remains poorly understood and insufficiently documented. Because of this, many investors may be overlooking readily available opportunities for generating impact within their existing investment portfolios.To address these misperceptions and missed opportunities, the IE2 initiative is developing a more rigorous framework for documenting the impact of engagement within the public equity asset class.

Impact at Scale: Policy Innovation for Institutional Investment With Social and Environmental Benefit

Explores policy options to maximize impact investing opportunities for institutional investors and accelerate the development of impact investing practices and products. Presents case studies of and insights from investors and service providers

Improving regulations and supervision of pension funds : are there lessons from the Banking Sector?

The main objective of this paper is to review the regulatory framework for pension funds, and examine whether there is scope for improvements in pension regulation, particularly in light of regulatory and supervisory developments in the banking industry. The report is structured as follows: The second section summarizes the literature on banking regulation and supervision, identifying the areas of consensus and the trends in regulation and supervision across countries. The third section summarizes the literature on the regulation of pension funds. The fourth section examines the scope for improvements in pension regulation, identifying possible lessons from the banking sector to the pension industry. The fifth section provides a summary and concludes.Banks&Banking Reform,Financial Intermediation,Financial Crisis Management&Restructuring,Insurance&Risk Mitigation,Environmental Economics&Policies

Sustainable investment in Turkey 2010

The main objectives of this report are as follows: 1 To understand and provide a review of the current state of the Sustainable Investment (SI) market in Turkey, 2 To identify the drivers and obstacles for sustainable investments, and assess the commercial feasibility of different approaches and initiatives that may stimulate the SI market in Turkey, 3 To analyze the institutional prerequisites and interventions that will fuel the development of investments, which would, in turn, encourage a betterallocation of local and international capital to sustainable enterprises and hence support sustainable development of the Turkish economy. This study forms part of a series of assessments of Sustainable Investment (SI) in Brazil (2009), India (2009) and China (2009), and draws upon earlier reports published by IFC jointly with the Economist Intelligence Unit: Sustainable Invest ing in Emerging Markets: Unscathed by the Financial Crises (2010) and with Mercer; Gaining Ground, Integrating Environmental, Social and Governance (ESG) Factors into Investment Processes in Emerging Markets (2009)

Do Socially Responsible Investment Indexes Outperform Conventional Indexes?

The question of whether more socially responsible (SR) firms outperform or underperform other conventional firms has been debated in the economic literature. In this study, using the socially responsible investment (SRI) indexes and conventional stock indexes in the US, the UK, and Japan, first and second moments of firm performance distributions are estimated based on the Markov switching model. We find two distinct regimes (bear and bull) in the SRI markets as well as the stock markets for all three countries. These regimes occur with the same timing in both types of market. No statistical difference in means and volatilities generated from the SRI indexes and conventional indexes in either region was found. Furthermore, we find strong comovements between the two indexes in both regimes

Towards Sustainable Project Governance : A Multisystem and Multilevel Analysis

Multilevel assessment has been put forward in this study as a key tool for tackling the challenges of sustainable development. Therefore, in addition to the micro scale, two other important levels are analysed: the meso and macro levels. Through spatial modelling, this research contributes to the context of project portfolio management and presents a gestalt of systems. The study starts from the analysis of macro scale sustainable development within the European context. Four key elements of the model are introduced: innovation, efficiency, co-creation and environment. This approach also presents a solution to the challenge of the paradigm shift that has increased the complexity of project portfolio management. Subsequently, the front-end of the portfolio has been formulated with a sustainable method. Meanwhile, the trend of eco-efficiency in the EU-15 countries is evaluated, and a longitudinal analysis determines the cases that are promoting sustainability. Furthermore, the challenge of sustainability requires a business model that governs the whole system. Thus, the meso scale has been studied through a systematic review of the literature and exploratory case studies of prominent companies in Europe. Consequently, an open innovation model as a mediator of the Agile method is discussed as a framework. The study gradually narrows down towards the micro scale in Finland. Although the efficiency of various cases has been analysed, another layer of analysis is performed in order to explore the reasons behind the efficiency in Finland. The performances of projects in Finland are assessed through decomposition analysis.Tämä tutkimus esittää monitasoista arviointia keskeiseksi välineeksi kestävän kehityksen haasteiden ratkaisemiseen. Sen johdolla on analysoitu mikrotason lisäksi kahta muuta tärkeää tasoa: meso- ja makrotasoa. Spatiaalisen mallinnuksen avulla tämän tutkimuksen tarkoituksena on edistää projektisalkunhallintaa sekä muodostaa systeemien kokonaisuus. Tutkimus on aloitettu kestävän kehityksen makrotason analyysilla eurooppalaisessa kontekstissa. Mallin neljä keskeistä elementtiä ovat innovaatio, tehokkuus, yhteiskehittäminen ja ympäristö. Tämä lähestymistapa tarjoaa myös ratkaisun paradigman muutoksen aiheuttamalle haasteelle, joka on lisännyt projektisalkunhallinnan monimutkaisuutta. Tämän seurauksena projektisalkun alkuvaihe on muodostettu kestävää menetelmää hyödyntäen. Samalla on arvioitu ekotehokkuuden kehitystä EU-15 maissa sekä pitkittäisanalyysin avulla määritetty ne tapaukset, jotka ovat edistyneet kestävästi. Kestävän kehityksen haasteet vaativat myös liiketoimintamallin, jolla voidaan hallita koko järjestelmää. Siten mesotasoa on tarkasteltu sekä systemaattisen kirjallisuuskatsauksen että merkittävien eurooppalaisten yritysten avulla. Sen seurauksena viitekehityksenä on käsitelty avointa innovaatiomallia ketterän mallin muuntavana tekijänä. Tutkimus kapenee asteittain kohti mikrotasoa Suomessa. Vaikka monien eri tapauksien tehokkuutta onkin jo analysoitu, tehdään toinen analyysi tehokkuuden syiden selvittämiseksi Suomessa. Projektien suorituskykyä Suomessa on arvioitu dekompositioanalyysillä.fi=vertaisarvioitu|en=peerReviewed

The Performance of Responsible Equity Funds During Market Crises

The purpose of this thesis is to study the performance of responsible equity funds during periods market crises. Previous literature has found evidence of outperformance by stocks of responsible companies and responsible mutual funds during market crises. Additionally, this thesis provides evidence of the performance of responsible equity funds and compares risk-adjusted returns of responsible investing to those of conventional equity mutual funds du-ring a sample period of almost two decades. This study employs a dataset of 110 US-based socially responsible funds and 120 US-based conventional equity funds from January 2000 to October 2019. These mutual fund groups are used to construct two time-series of the returns of an equal-weighted portfolio of the SRI funds and conventional funds, respectively. The abnormal returns of SRI and non-SRI are measured using the capital asset pricing model, the Fama-French three-factor model and the Carhart four-factor model. In order to measure the performance of these portfolios during crisis periods, these asset pricing models are extended to include crisis and non-crisis period alphas. The results suggest that both responsible funds and conventional funds do not generate abnormal returns during the whole sample period. In addition, SRI significantly underper-forms non-SRI during crises and their non-crisis period performance are similar. However, during January 2010 – October 2019 the SRI portfolio outperforms the conventional portfolio during crises and normal market conditions, although, the difference between the two is not significant. Responsible investing does not provide investors with downside protection during periods of market turbulence. On the contrary, SRI underperforms during market crises which contra-dicts previous research. Additionally, the performance of SRI does not significantly differ from that of non-SRI during normal market conditions. These results suggest that investors should not expect abnormal returns while investing responsibly. However, investors should not favor non-SRI neither, since the risk-adjusted returns of SRI do not significantly differ from those of conventional mutual funds

Agriculture as an asset class: reshaping the South African farming sector

International audienc