Mainstream Archives - Red Ribbon Asset Management

Mainstream Impact Investment: A Sea Change in the Market

By | News, United Kingdom | No Comments

Businesses that set out to minimise the negative impacts of their activities on the community, our society and on the environment at large are better equipped to be successful in the long term; actively structured to meet the demands of an increasingly social market without compromising on their capacity for commercial success. Indeed, these businesses are better able to succeed commercially precisely because they are responsive to this wider social setting.

That was the conclusion reached by last month’s report from the influential research team at Mckinsey which found that more than a quarter of assets now under management globally are being invested on the premise that environmental, social, and governance issues can significantly impact on a company’s long term performance; and given companies which embrace that same cultural mindset will usually perform better in the long term, that should all point to better short term investor returns too as well as a much more robust and resilient share price.

So it isn’t altogether surprising that the market at large is now starting to sit up and take notice of Mainstream Impact Investment strategies; the same strategies which have been at the heart of portfolio management at Red Ribbon Asset Management since the company was founded more than a decade ago.

Major global institutional investors adopting impact investment strategies include the Government Pension Investment Fund of Japan (the world’s largest, with AUM of over $1.1 Trillion), Norway’s Government Pension Fund Global and ABP, the Dutch State Pension Fund (which is the second largest in Europe). As the Mckinsey Report also points out, these behemoths of the investment world are not just switching course for ethical reasons alone: they are pursuing “a conventional investment aim of maximizing risk-adjusted returns”.

And the Report goes on: “…Sustainable investing has become a large and fast-growing major market segment. According to the Global Sustainable Investment Alliance, at the start of 2016, sustainable investments constituted 26 percent of assets that are professionally managed in Asia, Australia and New Zealand, Canada, Europe, and the United States ($22.89 trillion in total). Four years earlier, they were 21.5 percent of assets”.

As though to make that point good, the Government Investment Fund of Japan announced in July this year that it had selected three sustainability indices as future reference points for its passive investment in Japanese equities; and for its part, ABP had already announced that it would include as part of its cross portfolio investment criteria a reduction of carbon-emissions by 2020 of 25% as well as a commitment to invest at least €5 billion in renewable energy by the same date.

These trends are not just straws in the wind. They are all clear pointers to the future, supporting the new paradigm of Mainstream Impact Investment. And of course, the flip side is important too. Mainstream businesses that calibrate their activities so as to reduce their negative impacts on the community, society and the wider environment will also provide a long term, viable basis from which all three segments can flourish. It is the difference between a one off, short-term social project and an entirely new paradigm for society.

It is that important.

Red Ribbon CEO, Suchit Punnose said:

The influential research team at Mckinsey produced a major new report last month which found long term performance to be significantly affected by good environmental and social market performance, as well as a company’s capacity to deliver effective governance in both fields; and companies that perform well in the long term will usually do better in the short term too, which means compliance with all three criteria is likely to deliver better investor returns and a more robust share price for the company in the short term too. So its not altogether surprising that the market at large is now starting to sit up and take notice of Mainstream Impact Investment strategies; the same strategies which have been at the heart of portfolio management at Red Ribbon Asset Management since the company was founded more than a decade ago.

Read the Mckinsey Report here: https://www.mckinsey.com/industries/private-equity-and-principal-investors/our-insights/from-why-to-why-not-sustainable-investing-as-the-new-normal?cid=other-eml-alt-mip-mck-oth-1710

Read more about Mainstream Impact Investment here: reports.weforum.org/impact-investment/

Read about Red Ribbon Fund Management here: https://redribbon.co/

Impact Investment and Growth Markets: A Changing Paradigm

By | India | One Comment

Red Ribbon Asset Management is making its name at the cutting edge of “Mainstream Impact Investment”, which is a strategy aimed at generating competitive rates of return from businesses with strong growth potential, that not only create value for society, but also strive to reduce the environmental impact of doing so. Recent events have shown that Red Ribbon is certainly not alone in its commitment to combine asset growth with positive social and environmental impacts.

Sir Ronald Cohen, Chairman of the G8 Impact Investing Committee, announced in Mumbai last month that “Impact Investments” in India, which are primarily focused on social interventions, have exceeded $500 Million in 2015 and were expected to rise to $1 Billion by 2020: “Impact Investing is disrupting traditional philanthropy and has a revolutionary promise of becoming a $5 trillion global market, of which $1 trillion will be in India by 2050. With recognition and support from the Indian Government, India can be a world leader in this sector”.

The statistics certainly bear out Sir Ronald’s optimism: impact investments have been growing at a rate of 24% in India year on year since 2007 (socialimpactinvestment.org/).  Furthermore, Impact Investment Funds in Emerging and Growth Markets have also returned 9.1% to investors (as against 4.8% for Developed Markets) according to the Impact Investment Council of India (IIC: iiic.in/impact-investors/).

So exactly how is global business responding to this changing Paradigm?

Some of the answers are to be found in the recent Ernst & Young (EY) Environmental and Social Governance (“ESG”) report, which concluded that there is a strong (and strengthening) connection between non-financial performance data and investor decision-making.   Much of the impetus for more effective and better ESG reporting appears to be coming from the “collective voice of the investor community”, which continues to be the  “strongest advocate” for change in favour of impact investment strategies. In particular, the use of clear and transparent ESG measures is enabling investors to focus on the long-term, the underlying value of the business rather than on short-term gains  (ey-nonfinancial-performance-may-influence-investors.pdf).

The EY report is just one of many, that see a direct correlation between ESG performance and the financial performance of companies in the equities markets.  A report released recently by Barclays (“Sustainable investing and bond returns”), which was the first of its Impact Series, also drew a similar conclusion for Securities on the Bond markets.  In essence what all these reports allude to is the correlation between financial and non-financial factors in businesses with underlying strategies for managing ESG factors.

The conclusions reached in the EY report and others, resonate closely with Red Ribbon’s portfolio management strategies, a central component of which involves assessing the extent to which a business is able to reflect (dispassionately and objectively) on the impacts of its commercial operations by engaging with its internal and external stakeholders.
A business will ultimately be stronger in the long-term if it conforms to a collaborative model of transparent engagement with its stakeholders.  It is not just a matter of regulatory compliance, it is a sound basis for solid and sustainable growth, which is why “Mainstream Impact Investment” is a key component of Red Ribbon Asset Management’s success in securing strong returns for its investors with sustainable and measurable impacts on the community and on the environment.


Red Ribbon

At Red Ribbon we understand that the transition towards a resilient global economy will be led by well-governed businesses in mainstream markets, striving to reduce the environmental impact of their production processes on society at large and on the environment as well.


Sign up for our informative newsletter.