3.3 Case Studies: Examples of Mainstream Investors in Impact Investing

As described in Section 1.2, mainstream investors infrequently allocate capital with the intention of generating measurable social or environmental value. Section 4 will describe why this is the case. However, growing numbers of institutional investors are incorporating an impact investing approach into their portfolio management practices; two examples are described below.

PGGM, a Dutch cooperative pension fund service provider, invests part of its assets under management in investments that not only contribute financially to the return of the portfolio, but are also intended to generate measurable societal added value. PGGM calls these targeted Environmental, Social, and Governance (ESG) investments. For example, investments have been made in clean tech, sustainable forestry, renewable energy and listed sustainable companies. Most of these investments are over €100 million commitments. PGGM does not have a dedicated impact investment team, but seeks these investments throughout the portfolio. A responsible investment department supports the investment teams with defining what constitutes an impact investment and coordinates the impact measurement of these investments. Apart from more mainstream responsible investment key performance indicators (KPIs), such as voting for all shareholders meetings and applying exclusion policy to all portfolios, PGGM also has a KPI with some of its clients to annually increase the euro amount of total impact investments. Barriers that PGGM encounters to increase the number of targeted ESG investments are the small fund sizes, limited investment scope (regions, sectors) of the funds, first time funds without prior experience, and mixing asset classes within a fund. PGGM, however, is looking for ways to overcome these barriers to provide a valuable future for its members and the clients’ beneficiaries; for example, it is looking at designing new mandates or new impact investment products.

As a global insurance company, Zurich is directly exposed to many of the pressing social and environmental challenges of our time, such as the potential effects of climate change or the intensive use of scarce natural resources. Zurich has a direct interest in sustainable economic growth, and the development of resilient communities. Zurich is looking to impact investments as one way to address these issues by having a targeted, positive and measurable impact on society and the environment, but also generating a financial return commensurate with risks. Such investment opportunities do exist across asset classes, but to an insurance investor, the fixed income space is of particular relevance. Green Bonds are one of the initial focus areas, and Zurich is actively working to support the development of this market. At the same time, Zurich is currently looking into possible approaches in the credit and private equity space, taking a cross-asset class view of impact investing. In this process, strong support from executive leaders and dedicated responsibility are very important. At Zurich, a small team with senior leadership is responsible to coordinate impact investing and other responsible investment activities, such as ESG integration, in close collaboration with internal and external asset management teams and asset class experts. In the end, responsible investment cannot be “a little something on the side” – at Zurich it is embedded in the wider investment management philosophy, approach and organization.”