Impact Investing: Guidance for Designing Listed Equity Strategies That Generate Real-World Outcomes
Executive Summary
Impact investing has evolved from a niche philanthropic approach to a popular investment choice among mainstream investors. Investors in listed equity impact products, however, often fail to achieve the real-world change they seek. Whereas private equity investors can exert influence through concentrated ownership and direct governance, listed equity investors face dispersed ownership and limited control.
“Impact Investing: Guidance for Designing Listed Equity Strategies That Generate Real-World Outcomes” provides guidance for creating listed equity impact strategies that effectively deliver social and environmental impact. This report is written primarily for asset managers, but its insights and recommendations have relevance for asset owners, consultants, and regulators as well.
In this report, we define impact investing as requiring 1) a credible Theory of Change that links actions to outcomes, and 2) an investor’s active role achieving the targeted environmental or social outcome. Listed equity strategies that simply buy shares in companies whose products or services have positive effects on people or the planet — for example, renewable energy or affordable housing — without additional investor actions to improve outcomes, lead to investment products that lack the rigor necessary to achieve real-world change.
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