Class 3&4: History & Concepts Flashcards
What are the 5 different timings and evolution of SRI
- Ethical Investing - 1700s
- Socially responsible investment / CSR - 90s
- Sustainable Development 2000
- Responsible Investment - 2006
- Impact Investing - 2007
What are the 4 levels of Carrol’s CSR pyramid
- Economic Responsibility
- Legal Responsibility
- Ethical Responsibility
- Philanthropic responsibility
What were the key SRI phenomena of the Sustainable Development period in Europe?
Companies moved away from screening to engaging & choosing to invest in best ESG credentials
What is responsible investment
Incorporating ESG factors to better manage risk and generate sustainable long-term returns
What are the 6 PRI principals
- Incorporate ESG in analysis & decision making
- Active ownership & policies
- Appropriate disclosure
- Promote acceptance in industry
- Collaborate to enhance effectiveness
- Report on activities & progress towards principals
What is Long Term Responsible Investment? (LTRI)
Approach to investment where institutional investors integrate financial, and ESG criteria into the investment process in the pursuit of long-term portfolio returns.
Therefore taking into consideration beneficiaries’ financial needs and their wider objectives regarding the way in which their
savings are invested over the long term
What is impact investing?
“Impact investing is any profit-seeking investment activity that intentionally generates measurable benefits for society” (Grabenwarter and Liechtenstein, 2011: 10) – not only noting the intent to generate benefits to society but also emphasising the measurability of these benefits.
What are the 4 schools of thought regarding the difference between Socially Responsible Investing and Impact Investing?
- SRI and Impact Investing used interchangably
- SRI as a sub-form of impact investment
- SRI as an overarching concept and Impact Investment as a form of SRI
- SRI similar but not congruent with impact investment
In what 4 ways to impact investing and SRI differ?
- Objectives
- Nature of Investment
- Funding Mechanisms
- Return Expectations
How do the objectives of SRI differ to Impact Investing
SRI - concerned with improving corporate practices in terms of ESG criteria
Impact Investing - Concerned more with proactively solving E/S challenges
How do the nature of investments of SRI differ to Impact Investing
SRI - Typically fund large investee companies
Impact Investing - Typically fund small investee companies
How do the funding mechanisms of SRI differ to Impact Investing
SRI - Typically listed equity / debt instruments
Impact Investment - typically direct investments (Private equity / VC)
How do the returns expectations of SRI differ to Impact Investing
SRI - Near or above commercial returns
Impact Investment - Non-financial impact over commercial market returns
What are the 5 pillars of the IFC Impact Investing Principals
- Strategic intent
- Origination and structuring
- Portfolio management
- Impact at exit
- Independent Verification
What are the IFC 9 principals for Impact Investing
- Define strategic impact goals in reference to strategy
- Manage strategic impact & financial returns at portfolio level
- Establish investor contribution to the achievement of impact
- Assess the expected impact of each investment (systematic approach)
- Assess, address & monitor potential risks of negative effects of each investment
- Monitor progress
- Conduct exits considering sustained impact
- Review / document / improve decisions based on impact achieved
- Publically disclose alignment with principals and provide regular independent verifications.
