Positive impact investing is a popular term these days and has become synonymous with investing in companies that do something ‘good’. This is understandable but unfortunate. Why? It opens the door to poor investment solutions which are built on the simplistic fallacy that companies which make something ‘good’ are also good investments. We have highlighted our issues with thematic funds here.
We believe that sustainable investing done the right way can offer clients the potential for a positive impact with their capital whilst also potentially outperforming the market. Indeed, our sustainability fund is built on the founding premise that we will never invest in anything simply because it sounds good, we instead seek out companies that capture economic value from doing good, and invest at an attractive price.
We analyse the positive and negative impacts of all our investments using our three dimensions of sustainability: product, practices and improvement. Gaining meaningful insight necessitates that we think through second and third-order impacts in order to identify differentiated, sustainable, growth investments for our clients.
But here’s the thing, we don’t need to invest in wind turbine, solar panel, water pump or electric vehicle manufacturers to achieve this. Indeed, poor business models, industry dynamics and valuations often prevent us from doing so.
Yet this does not mean we don’t deliver a positive impact with our clients’ capital. We continually uncover unappreciated gems with positive impact even if this is not obvious at first glance. Sometimes via their practices (i.e. how they operate) but more often via the second-order impacts of their products… and these less obvious impacts are often very meaningful indeed. And let’s be clear, this is definitely not achieved via a top-down process of screening for companies that sound good.
We invest in lots of these positive second-order impactors, but here are a select few to ponder:
All were identified via our process of diligent bottom-up research. None of their second-order impacts are obvious. All of them are impactful.
About the author
Craig Bonthron is an investment manager in the Equities team, responsible for co-managing global equities portfolios. He joined us in 2014 from SWIP, where he was investment director in global equities. In addition Craig also had analysis responsibilities for the tech, energy and utility sectors. Prior to SWIP, he was a portfolio manager at Kleinwort Benson Investors, a member of the global environmental equity team. Craig has a 1st Class honours degree in Building Surveying, an MSc with Distinction in Business Information Technology Systems from Strathclyde Business School. He has 16 years’ industry experience (as at 31 October 2017).