GIIN looks at how asset owners approach impact

Institutional asset owners set environmental and social impact goals in a variety of ways, according to a report out Tuesday from the Global Impact Investing Network.

The GIIN is developing a series of issue briefs on how pension funds, insurance companies and other institutional asset owners set impact priorities and choose targets.

The first brief is based on a survey of 64 pension funds and insurance companies globally, plus some individual interviews.

It found that most of the asset owners seek to achieve environmental and social impact across three to five categories. The most often cited categories were climate at 78%, real estate at 72%, energy at 67% and infrastructure at 56%. They have largely coalesced around climate change as a financially material risk factor, the report said.

The key factors for them when setting impact priorities include senior leadership and organizational culture that can be both a barrier and enabler to incorporating impact investments, investment beliefs, internal expertise, regulatory environments, and external environmental and societal drivers.

For those asset owners that set impact targets, two common emerging strategies found were a top-down approach where targets are set at the portfolio level and a bottom-up approach where targets are set at an investment level.

For environmental impact, asset owners set quantifiable and specific targets with science-based reference points, while social targets cited were frequently qualitative and broad.

“Ever mindful of their fiduciary obligation, such investors increasingly see the many ways that the climate crisis and deep social inequities threaten both the long-term value of their assets and the well-being of their beneficiaries. Simultaneously, new policies and emerging regulation are beginning to shape how such asset owners incorporate impact alongside risk and return,” said Amit Bouri co-founder and CEO of the Global Impact Investing Network, in the report.

“Institutional asset owners — especially those who recognize how a changing world affects their responsibility to their beneficiaries – have vast opportunity to generate positive change,” he said.