Panel
I'm Not an Impact Investor, or Am I?
Milken InstituteCaitlin MacLean, Janet Cowell, Sharon Hendricks, William Lee, Shawn Wischmeier, Bill Lee
- Global environmental and demographic shifts, including energy transitions, resource scarcity, and population growth over the next 20 to 50 years, are expected to create significant risks and value opportunities in infrastructure, low-carbon environments, and early-stage venture capital.
- Market evolution is projected to feature a continued increase in impact investing flows and manager cognizance, though confusion may arise from divergent terminology and a lack of sophisticated long-term strategies dedicated to specific sectors.
- Institutional investors anticipate retaining engagement and conversation with corporations rather than adopting divestment policies for complex issues like climate change or Iran, aiming to maintain voice and mitigate fiduciary risks.
- Financial performance expectations include a fund assumed rate of return of 7.5 percent, potential challenges in achieving mid-double digit returns on specific solar deals without optimal fossil fuel divestment timing, and the necessity for managers to integrate ESG measures to avoid missing market edges.
- Operational and strategic challenges persist regarding the alignment of investment philosophies, with current board alignment on specific missions estimated at only 20%, alongside difficulties in standardizing metrics and aggregating portfolio data for carbon footprints.
- Investors plan to utilize proactive stances, customized checklists for ESG integration, and robust board conversations to navigate fiduciary duties, while seeking managers with second or third fund track records to validate sustainable strategies.
- Benchmarking remains a contentious area, with existing benchmarks described as inadequate, leading to a preference for holistic fund evaluation and standardized metrics rather than niche treatments or special benchmarks for sustainable investing.
- Specific regional and sectoral expectations include tracking in-state job creation metrics in North Carolina, navigating legislative divestment from Iran in that state, and managing the difficulty of replicating large-scale solar deals for smaller foundations.