Impact Investing: Measuring the Impact Credibly

The demand of institutional investors for sustainable investment opportunities and funds in the alternative and private markets sector is continuously increasing. But how can it be verified whether a fund actually invests sustainably? What standards for measuring and reporting exist in practice in the private markets and impact investing sector, and how can asset managers position themselves credibly here? These questions were at the centre of the "BAI Insight 59" conference, followed by the presentation of the BAI Science Award, to which FERI and the Bundesverband Alternative Investments e. V. (BAI) jointly invited participants to Bad Homburg.

"Today, the measurability of the positive impact on climate, environment or society is a decisive criterion for many investors when selecting sustainable investments," emphasised Antje Biber, who as Head of SDG Office is responsible for the sustainability strategy of the FERI Group. However, there are almost no corresponding public databases for private market funds. FERI has therefore developed an assessment approach that includes a proprietary ESG & Impact Manager review process and SDG-related reporting. The "SDG Mapping" assesses the impact of the target investments with regard to their future prospects and effects on the environment, economy and society, among other things. The results of the mapping enable transparent reporting on the compatibility of the target funds with the Sustainable Development Goals (SDG) of the United Nations.

Financial industry needs to be mobilised

"Impact investing is becoming mainstream across all asset classes and all investor types," said Dr. Andreas M. Rickert, Co-CEO of Nixdorf Kapital AG, during the panel discussion with other major institutional investors. However, he added, the financial industry still needs to be mobilised more. "In order to achieve the SDGs, 2.5 trillion US dollars are missing annually," said Rickert.

Frank Schäfer of Peakside Capital Advisors GmbH gave an insight into sustainability investing from the perspective of a real estate fund. "The topic continues to gain importance among all stakeholders in the real estate industry," said Schäfer. But here, too, there are no uniform standards in terms of measurement and reporting so far, he said.

Targeting impact in portfolios

"The impact of an investment can take place on two levels, the investor impact and the company impact," emphasised Antje Biber of FERI. The targeted provision of capital and the active
active engagement of investors enable changes or improvements at the target companies. The company impact is more direct and describes the activities that achieve a positive impact on the environment and society. With a special ESG & Impact Due Diligence process and the comprehensive SDG Mapping, FERI checks the processes, credibility and impact of the portfolios.
FERI implemented a sustainability approach years ago that combines ESG criteria with the 17 Sustainable Development Goals (SDG) of the United Nations and selects investments based on independent data.