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How FBAOs engage in impact investing

Following up from our most recent FCI update (reviewed at the June FCI Interest Group meeting) and soon to be released in our updated Good Intentions paper, we find that just 37% of faith-based asset owners (FBAOs) mention impact investing in their Investment Policy & Guidelines (IP&G).

While working with a faith-based asset owner (FBAO) on impact investing, we were recently asked to find examples of IP&G language on how other FBAOs treat their impact investments. We found a variety of examples (37 in total out of the 90 studied), with varying definitions of impact investing such as:

‘Impact investing is part of our overall strategy. It allows us to align more closely to our charitable objects of supporting Christian beliefs and ministry while still being an economically sound investment option.’

The language above is clear in its messaging and refers to being aligned with the faith’s beliefs, teachings and values. However, an improvement to this could include a definition of what impact investing means to that FBAO, as in the following example:

‘For the Fund, Impact Investing refers to the approach of actively and intentionally making investments that seek to achieve both a commercial risk-adjusted financial return and positive spiritual, social or environmental impacts.’

As well as a more coherent definition of what impact investment means for that particular FBAO, this also includes a useful indication of what is expected in financial returns.

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Impact investments also require measurement of what the non-financial expectations and outcomes are. Some FBAOs delegate the responsibility of this to an ethical oversight committee, as follows:

‘The Fund will maintain an Impact Investing Policy to articulate the way in which impact is monitored, measured and overseen. Oversight of the Policy, and of measurement, management & classification of impact investments and outcomes, is delegated to the Ethics Committee.’

Measurement of impact investing also can require specialist consultant or asset manager reporting and advisory to implement any changes to the impact portfolio. This is a crucial component as timely reporting allows for more accurate impact measurement, enabling more FCI-aligned investments.

We have discussed the importance of measurement in a previous post, which also highlights the importance of continually refining an impact portfolio with ‘market developments’.

If you are interested in working with FaithInvest to receive tailored research or insights into how to be more faith-consistent with your organisation’s investments, please contact us here.


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