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Deutsche Bank spinoff IMP+ACT Alliance launches digital ESG fund transparency tool

Deutsche Bank spinoff IMP+ACT Alliance launches digital ESG fund transparency tool

IMP+ACT Alliance today launched the IMP+ACT Classification System (ICS), which will allow asset managers to self-report how they classify, measure and manage ESG impact, serving financial risk mitigation strategies and advancing global goals such as the UN’s Sustainable Development Goals (SDGs).

At the launch event hosted by the City of London Corporation and the UK Impact Investing Institute, practitioners were given an exclusive look at the digital platform, developed in consultation with over 150 organisations and learned how consistent information on types of impact across multi-asset class portfolios can be beneficial.

With an aim of collaborating, educating and sharing best practices, IMP+ACT Alliance hope that the ICS will foster the “right conversations among practitioners about how they are thinking about evolving their practices to strengthen and enhance oversight on ESG risk and impact,” as Ben Constable-Maxwell, head of sustainable and impact investing at M&G Investments elucidated.

Catherine McGuiness, policy chair at the City of London Corporation kicked off the online launch exploring the importance of finding and promoting solutions which will move the economy towards a more sustainable future.

“We have partnered with IMP+ACT Alliance on the delivery of the ICS technology solutions. Stakeholders in the investment community repeatedly tell us that comparing the ESG and impact credentials of investment funds continues to be a challenge,” McGuiness said.

She continued: “At the moment, we’ve got a myriad of frameworks and standards for measuring, managing and reporting the social and environmental impact of investment. Without a common language, as sustainable finance means different things to different people, this has created confusion, lack of consistency and hampered efforts to allocate capital to investment that can contribute to positive change.”

Using ‘Impact Classes’ that will group investments with similar impact characteristics, even when asset managers are using different techniques, IMP+ACT will attempt to build a global consensus on how to measure, manage and report impact. This categorisation will allow for a degree of comparability between the impacts of investments at portfolio level as the industry gets better at consistency.

Sarah Gordon, CEO at the Impact Investing Institute echoed this sentiment and said that while different actors are pushing in the same direction, the core mission is to increase growth and improve the effectiveness of impact investing, which can be done by more private sector capital being funnelled into helping with social issues and achieving the UN SDGs.

“There are a plethora of standards and there is not one single way of doing it. At some point in the future, organisations will have to account for the impact that they have, whether that’s positive or negative. But that’s some way in the future. Today’s launch of the Impact Classification System is a critical step forward towards that goal. Technology can provide us with some of the most important and cost-effective solutions to the challenges that the impact investment market faces.”

In addition to being supported by the City of London Corporation, strategic partners such as Deutsche Bank, the IMP, Bridges Insights, Toniic, Impact Capital Managers and the Make My Money Matter campaign have collaborated with IMP+ACT and support the network’s efforts.

Earlier this month, Claudia Coppenolle, co-founder and CEO of the IMP+ACT Alliance, said in conversation with Finextra Research that in the investment space, many believe that a specific strategy is required and that the motivation to manage ESG impact is driven solely by philanthropic desire.

While some investors and asset owners may want to make a positive change, others may use ESG factors to understand commercial opportunities by investing in companies that are able to cut costs by saving energy or managing their carbon emissions. All investments have a positive and a negative impact. “The minute you invest, you will have an impact on people, the planet and the economy,” Coppenolle said.

As this sentiment is increasingly understood, there is also a need for greater education about the financial implications that some ethical, social and governance (ESG) or sustainability factors have on investment portfolios.

“While some try to distinguish mainstream investing from sustainable investing, integrating ESG factors into capital allocation decisions and investment strategies is simply good investing.” She adds that by considering, measuring and reporting ESG factors in a transparent fashion, organisations can also start to manage and reduce regulatory and reputational risk long term.

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