Pay It Forward: Episode 6 - Impact - The next evolution for Responsible Investment

Tuesday, October 27, 2020 at 2:12:48 PM GMT+10:00

In episode 6 of the Pay It Forward series, Boardroom.Media Reporter Velvet-Belle Templeman speaks to Rosemary Addis, from Impact Strategist


Rosemary's global portfolio includes Ambassador of the Global Steering Group for Impact Investment, Senior Advisor to the U.N. Development Programme's SDG Impact, Founder and Director of Impact Investing Australia, Director of Indigenous Business Australia and Chair of the Climate Ready Initiative Advisory Board at Griffith University. 


Today, they discuss impact as the next evolution of responsible investment.


At the recent GSG Summit, the Global Steering Group launched a Leaders’ Declaration for a just and impact led recovery. If you would like to sign the declaration you can do so here. 


Article by Rosemary Addis, Impact Strategist, August 2020:


Companies need to count on impact to stay ahead of the game


Rio Tinto’s actions at Juukan Gorge hold a lesson for us all. Rio blew up the 46,000-year-old Aboriginal site to expand their mine. Rio is now accounting for their behaviour and its consequences - for the devastated community, before a Parliamentary inquiry and to investors.


 Westpac’s Board has likewise had to assess whether our internal cultural and management systems, processes and governance are fit for purpose to manage non-financial risk. In the bank’s case this followed allegations by financial regulators of millions of breaches of anti-money laundering laws and ignoring patterns of transactions consistent with child exploitation.


This is a bellwether moment. Companies considered by themselves and others as top performers on social and environmental responsibility faced with consequences that cannot be undone, for local communities and for their future. 


From financial services and investment to oil and gas and the fashion industry, companies are under the spotlight on sustainability. The pandemic, economic conditions and climate risk have combined in a perfect storm of rapidly shifting expectations. The firms that survive will recognise their actions have consequences beyond their bottom line and take a more proactive and integrated approach to non-financial performance. 


As governments around the world continue to drive billions of dollars in economic stimulus, calls for a new bargain are growing louder. Political leaders are including conditions from quality jobs to reporting on climate in recovery packages. People are calling for different choices in how their money is invested through movements such as Make my Money Matter in the UK.


This shift started ahead of the pandemic. In August 2019, the US Business Roundtable called time to re-think shareholder primacy and recognise stakeholder interests. In 2020, International Business Council of the World Economic Forum called for accounting of financial and non-financial performance. The first phase of the EU Sustainable Finance Package in December 2019 and review of the non-financial reporting directive set the stage for regulation. 


Whether the tipping point is regulation, stakeholder activism or greater appreciation of the risks of mis-aligning social, environmental and financial performance, all companies will need to report impact performance alongside financial performance within a few years. 


The partnership for sustainable capital markets between Japan’s government pension fund with US fund California State Teachers’ Retirement System (CalSTRS) and USS Investment Management Ltd announced in March 2020 signals impact is becoming a driver for investment portfolios. The message is clear: companies that seek to maximize corporate revenue without considering their impacts on other stakeholders … are not attractive investment targets for us. 


For most companies, impact measurement and management have been in the too difficult bucket. Few have embraced integration. PWC’s SDG Challenge 2019 found that 74% of companies mention the UN Sustainable Development Goals in their reporting but only 1% are reporting quantitative measures to show progress. Those who wait until they are forced to consider their impact risk losing more than their good name. 


Directors don’t need to wait to act. 5 straightforward, concrete actions companies can take now start to embed more proactive impact management and stay ahead of the game.


First, make impact management someone’s job. Show that this is a leadership role to send a message that impact is serious business. Working out where your risks and your strengths are for making impact count for performance. 


Second, make it clear this comes from the top and get senior leadership on board. Staff, customers and investors need to hear your vision and be invited to going to utilise strengths of your company for the greater good. Look to leaders like Danone for inspiration on how an impactful vision can secure the future of your business; their positive incentive financing strategy has lowered cost of capital based on sustainability performance. 


Third, back words with action, talk to stakeholders and build understanding of where you shine bright and where you need to up your game. Conduct a high- level assessment of current business practices and products and understand your supply chains. Get clear about positive and negative impact on the environment and on people’s lives.


Fourth, set out a roadmap that is clear and transparent about where you are heading and how you will get there and engage stakeholder in the process. This needs to be based on evaluation of market opportunities that leverage the firm’s strengths and show how your product and servicing offerings will be adapted and new offerings created to align with your impact objectives. 


Finally, develop and embed impact into your strategy, management approach, reporting and governance. Commit to transparency and accountability. Tie initiatives to strategy and governance to action including incentives that link to financial and impact outcomes of your business. 


The Great Depression in the early 1930s was the jumping off point for global accounting standards. The Covid-19 pandemic will be the jumping off point for global impact standards. Impact is mobilising people around the world with calls to build back better. In this new order, impact will form the third strand in a triple helix of performance, intertwined with risk and return.


 Like lots of things in life, making impact count may be difficult. But difficulty is not an obstacle to progress. In any event, we are already in difficult territory as we chart paths through the economic social and challenges ahead. People have sequenced the human genome and manned a space station. We can do difficult.


If not now, then when?


--


To stay up to date with the Pay It Forward series, visit boardroom.services/payitforward

For more Thought Leadership series, visit boardroom.services/thoughtleadership

Thanks to our brand partner: Humanity in Business

Leave a Comment

Your email address will not be published
you may like image
Pay It Forward: Episode 6 ...

Pay It Forward: Episode 6 ...

Spotting Naked Emperors – ...

Spotting Naked Emperors – ...

Anadara Asset Management -...

Anadara Asset Management -...

ASX:MAI - Mainstream expan...

ASX:MAI - Mainstream expan...

 Pay It Forward: Episode 3...

Pay It Forward: Episode 3...

Pay It Forward: Episode 2 ...

Pay It Forward: Episode 2 ...

WEBCAST Calendar

  • 26 Oct

    01:00

    Coca-Cola Amatil Investor Update

    COCA-COLA AMATIL LIMITED
  • 26 Oct

    01:00

    ITW Q3 2020 Earnings Webcast 23 Oct 2020

    ILLINOIS TOOL WORKS INC
  • 26 Oct

    01:30

    Q3 2020 Results 23 Oct 2020

    BARCLAYS
  • 26 Oct

    02:00

    Adairs Limited Annual General Meeting

    ADAIRS LIMITED
  • 26 Oct

    02:00

    Nova Minerals (NVA) - Building a Gold District in Alaska 231020

    NOVA MINERALS LIMITED