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Real World Impact: A future-proof investment thesis for faiths

Aaron Pinnock, Impact Investment Analyst at the Church Commissioners for England, offers an exclusive insight into key learning from developing the Commissioners’ new impact investment framework.


"Impact encompasses everything – it’s a bit greedy but it does! An impact lens helps to tie all responsible investment issues together, giving investors an enhanced understanding of how their portfolio effects the real world." – Aaron Pinnock

Detail of Westminster Abbey
Westminster Abbey, London, UK

FaithInvest: The Church Commissioners’ document “Real World Impact: Creating a framework to target, manage and measure the social and environmental impact of our investments” strikes me as a must read for every faith investor. Why impact and why now?


Aaron Pinnock: Responsible Investment is evolving fast and impact is the logical next step. We are seeing the industry move on from looking at ESG risks to exploring outcomes – the real-world social and environmental impacts of investments – such as changes to education and health care. I like to think about impact as a holistic lens that looks at these outcomes.

The idea that money invested well can make a positive impact on the world and provide a return is clearly appealing, and in many ways a lot more straightforward than ESG. With the UK’s new Stewardship Code and the PRI placing more emphasis on outcomes-aligned investing too, we thought the time was right to create our own impact investing framework.

Aaron Pinnock, Church Commissioners for England
Aaron Pinnock, Church Commissioners for England

FaithInvest: Does the word ‘impact’ mean the same to all investors?


We feel that ‘impact’ can be thought of in two ways. Impact investing, as an investment approach, is focusing on investments that are 100% focused on delivering a positive real-world impact, while impact measurement and management (IMM) can be a tool to measure and manage the real-world impact that a wide range of investments have in the world.

Our experience at the Church Commissioners is that it isn’t currently feasible to have a large, diversified portfolio that explicitly targets positive impact across all its investments, but that it is important for every manager to look at their portfolio through an impact lens.

FaithInvest: So, I’m a faith-based asset owner keen to get started with impact. Where should I begin?

The UN Sustainable Development Goals (SDGs) are a good starting point for any investor keen to understand societies’ problems and create an approach to address, or at least measure and manage, them. Like all faith investors, we have guiding non-financial principles, and through this exercise we realised they neatly overlapped with the SDGs, and found that they provided useful basis for linking our stated missions to investible themes.

Asset owners who are less familiar with impact could also take a look at the Impact Management Project’s Five Dimensions [link to example box], which we include in our new framework as part of our process to conceptualise and measure our impact.

FaithInvest: Measuring impact sounds quite challenging. Can you tell me more about that?

Yes, the question of measuring impact is more difficult. Determining how much of a social or environmental outcome results from any one investment is tricky, and the full benefits – or negatives – may not manifest fully for several years. This means it’s exceptionally hard to get a handle on the sum impact of a portfolio with hundreds of companies.

Our solution, at least for the time being, is to find something measurable that can serve as a proxy for the outcome of an investment. We do this by following a theory of change pathway[1] to look at outputs - such as the number of hospitals built, or carbon emissions released – as a useful proxy for outcomes.

This enables us to use real hard data to weigh up the positive and negative outputs of a company’s operations, products or services and net these off to give an overall picture of its real-world impact.

FaithInvest: I suppose in an ideal world we would have the numbers to directly measure outcomes, rather than outputs. Are ESG data providers responding to this need?

Well, for starters, there is no shortage of ESG data providers! But when it comes to translating outputs to outcomes, data is scarce. Perhaps this will evolve as demand grows.

That said, data on social outputs – such as the number of educational books a company has produced, or environmental outputs – such as the volume of waste-water a business has treated, is available, often directly from the company. Interestingly, we find companies that have an impact focus often disclose data on social outputs more readily than environmental ones.

FaithInvest: What about performance? Can an impact lens enhance portfolio returns?


It’s too early for us to give concrete examples of the ways in which our impact lens might have improved performance. However, if we take a step back it is clear that it gives us even more insight into the nature of our investments and their opportunities and risks.

In many ways, impact is a future proof investment thesis – global social and environmental challenges will not go away quickly! In this way I believe an impact lens can enhance the overall portfolio management process far more than just by looking at ESG.

FaithInvest: Asset Owners always have long to-do lists. Why should Impact be at the top?

There is a simple argument that investors should be a force for good, and as faith-based investors we certainly think so! But there is a pure economic argument too, and this centres on the idea of resilience. COVID-19 has shown us how the unexpected can occur. Climate change is one example of a known unknown, coming whether we like it or not. Having a portfolio that is resilient to these external risks is increasingly vital, and an impact lens will help to build this resilience.

Impact encompasses everything really, it’s a bit greedy but it does! An impact lens helps to tie all responsible investment issues together, giving investors an enhanced understanding of how their portfolio effects the real world.

If resource is an issue for an asset owner, I think developing the idea of an impact framework and some high- level principles is a good start. It should get the big ideas going and sparks flying!

FaithInvest: Lastly, what are the big themes that are going to shape the impact conversation at the Church Commissioners in 2021?

Three things jump out. First, of course, climate change. At the Church Commissioners we have set a net zero target and now need to translate this commitment into our strategy. Next comes biodiversity, something that is really hard to measure, but we need to think a lot more about in relation to our portfolios. And third, how can we encourage more gender and ethnic diversity within both our managers and underlying companies? Those are our big questions for 2021.


Just as with impact, we don’t have all the answers – no one does – but that’s no reason not to look for them.

[1] Page 13, Real World Impact - Creating a framework to target, manage and measure the social and environmental impact of our investments


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