Welcome to the first in our series of articles exploring Sustainable, Responsible and Impact Investment (SRII).  As Sandaire’s Head of SRII and Family Governance, I think that it is important to begin by addressing what SRII is and how Sandaire is responding to increasing global demand for all three approaches – especially from Next Gen/Millennials and women.

A recent report by the World Economic Forum (WEF) states that “Younger wealth holders are more socially and environmentally conscious:  According to the 2014 Deloitte Millennial survey, nearly 30% of Millennials believe the number one priority of business should be to improve society”.  Our own research and many other similar studies confirm that 80% of Millennials are interested in sustainable or impact investing. The WEF report also highlights that social, political or environmental impact in evaluating investments were considered “somewhat” or “extremely” important by 65% of women, compared to 42% of men.

Sandaire is well-placed to respond to this growing demand amongst our client base of individuals, families, foundations and endowments.  We have invested in specific expertise and processes to ensure that we can meet this demand from clients who seek to invest in this way.

How do we respond to specific client needs?

We first ask the client whether they want to align their investments with their values or at least check that their investments are not at cross-purposes with their philanthropy (such as holding a tobacco company whilst donating to cancer research).  We then identify specific values which can be found in certain types of investments and we remove from their portfolio those companies which are not consistent with their defined value system (for example, arms-makers or, more recently, coal companies).

This approach is generally known as Socially Responsible Investment (SRI) and involves a “negative screen”.  It may also be known as Ethical Investment because it dates back to the Methodists and the Quakers and has evolved to include other faith-based approaches to investing.  It can go by many names but essentially means that your moral compass guides your investment decisions.

The next step is also a responsible approach as defined by the United Nations Principles for Responsible Investment but it is more widely known as Sustainable Investment incorporating Environment, Social and Governance (ESG) factors into one’s investment decision-making process.  This approach is both a risk assessment as well as an opportunity target (i.e. intentionally seeking investments which offer appropriate financial return in the sectors of resource efficiency, food security, water safety, etc.).  We at Sandaire firmly believe that ALL foreseeable risks must be taken into account when evaluating a potential investment so ESG factors are part of this process as we aim for long-term value creation for our clients.

We then ask clients whether they want their investments to demonstrate an intentional and measurable positive impact on society.  This is Impact Investment.  If they seek to address world poverty, for example, we can identify funds or direct investments which offer micro-finance loans to the Bottom of the Pyramid – this is distinct from a philanthropic grant or a donation in that the capital invested in the fund will be repaid to be loaned out to another needy borrower rather than being a one-time gift and the client can expect a financial return as well.  As stated in the report of the G8 Social Impact Investment Taskforce, there is a new paradigm “Social Impact Investments are those that intentionally target specific social objectives along with financial return and measure the achievement of both”.

We are keen to help families, foundations and endowments to manage short-term income needs with long-term value creation through Sustainable, Responsible and Impact Investing.  To find out more, contact bonny.landers@sandaire.com.