Fund selectors and asset allocators should push fund managers for clear metrics that measure impact investments, according to a Dutch fund management group.
In a research note released on Tuesday, NN Investment Partners said investors will increasingly have access to wider pools of data and a standardisation of measurement methodologies in the coming years, meaning they can demand more evidence from their fund managers on impact investments.
The company said specific impact measures such as corporate water consumption or carbon footprints have become easier to chart in recent years, and it urged investors to look more closely at other “yardsticks” in the years that follow.
“Improved reporting and transparency, the rise of more data sources and the standardisation of measurement methodologies will no doubt lead to substantial progress on this issue in the next few years,” said Jeroen Bos, head of Equities at NN Investment Partners.
“Measuring the positive impact made by companies remains a challenge at present for the sector and will likely generate much debate in the market going forward, prompted by asset owners, regulators and non-governmental organisations,” he added.
The company said it is already possible for investment managers to calculate the weighted carbon footprint of an investment portfolio and measure that against an industry benchmark, such as the MSCI World.
NN Investment Partners believes that greater transparency on specific Impact metrics will have implications for portfolio managers, with CO2 emissions and water consumption potentially showing how efficiently companies are dealing with costs.
“Treating the environment well by reducing emissions or using less water can improve a company’s profile among consumers and having lower emissions can also make it less vulnerable to future increases in carbon pricing and taxes,” the company wrote in a media statement.