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Impact investors forcing fund managers to change direction

By Lisa Wade

Investors are demanding ethically responsible investment options, and fund managers are being forced to respond, says Matthew Dent, director of the Emerald Wrap, which offers an Impact Investment platform for Responsible investing (RI).

“The days of the two-dimensional approach of risk and reward to investment is being replaced by a far more sophisticated four-dimensional framework that adds ‘impact’ and ‘alignment’ to the equation.

“As companies respond to the demands imposed by government, media and environmental and social pressure groups to address environmental, social and governance (ESG) issues, so too are fund managers having to structure their portfolios with this critical factor top of mind.

“The days when ESG/Impact issues only received lip service are fast disappearing, with more and more investors – institutional and retail – demanding that their investments reflect socially and environmentally sound principles,” he says.

The Emerald Wrap, the flagship product of the Emerald Club, was Australia’s first dedicated RI wrap platform for financial advisors and their clients. It was acquired by boutique structured product provider, Instreet Investment in early 2015, and in May this year it entered a partnership with Impact 20/80 to promote socially responsible impact investments.

Instreet managing director George Lucas says: “We believe that impact and alignment are as important as risk and reward to the future of portfolio management and construction. So we have recognized this by updating our in-house investment philosophy and investment team.

“We believe the days of one generic fund or answer for customers is over, with new platform technologies allowing customers to tailor their own solutions.

“Never before have there been so many good products that allow investors to not only understand their investment values, but construct portfolios to align with them.

“We look at all of the upcoming sectors, clean technology, renewables, 4D printing, water, health, divestment and equality, to name a few, where investors can dovetail their risk/reward goals while meeting their ESG concerns,” he said.

Lisa Wade, an Emerald Wrap director and founder of Australia’s first carbon fund, says: “It’s time for portfolio construction and philosophy to enter the fourth dimension.

“Alignment comes down to choice and while Emerald remains a B2B service, we will be working with our advice network to embrace this new choice world and add impact and alignment with portfolio construction philosophy.”

Wade teamed up with Dent and Michael Brookes to form Impact 20/80. Brookes, who brought a hedge fund background to the team, says: “Hedge funds are known for ‘trading’, but at the heart of it they are about finding value in a different way.

“Wade’s strategic insight into the new low carbon world and the sectors that will outperform perfectly complements my portfolio management expertise.

“We bring the best of the old and new worlds to our customers. It is a hedge fund’s responsibility to source opportunities for investors to make money the way they want to make money; you choose the people that invest the way you don’t know how to. To this equation we now add the benefits of technology.”