Measuring the impact of investment decisions is essential in the transition to a sustainable economy. KPMG and the Cambridge Institute for Sustainability Leadership (CISL) are developing an online tool that provides insight into the impact of investments on people, the environment and society.
KPMG in the Netherlands and the Cambridge Institute for Sustainability Leadership (CISL) will work together closely to make the social and environmental impacts of investments more visible. The core of the collaboration is the development of an online tool that provides insight into the influence of investments on people, the environment and society. The tool is particularly suitable for asset managers and asset owners for whom it is generally challenging to measure the impact of their investments at portfolio level. The basis for this collaboration is "The Investment Impact Framework" developed by CISL alongside a group of leading asset manager and asset owners convened by CISL – The Investment Leaders Group. This framework provides insight into the impact of investments on people and the environment based on six themes derived from the Sustainable Development Goals (SDGs) of the United Nations. The online tool that KPMG and CISL are developing will make the framework much more easily accessible for asset managers and owners. The ultimate goal is to assess investment portfolios based on a common impact standard, enabling both asset managers and investors to make well-considered sustainable choices with their investments.
"The world is currently seriously out of balance," says Leonie Jesse of KPMG Sustainability. Jesse: "As a result of the COVID-19 outbreak, we have quickly been confronted worldwide with our own vulnerability. Furthermore we realize more than ever that we have greatly exceeded the Earth's carrying capacity on a global scale. That is why it is very important to promote sustainability and to ensure that people, the environment and the economy are rebalanced in a sustainable world. The financial sector plays a key role in this. Measuring the impact of investment decisions is essential in order to properly interpret the role of the sector in the transition to a sustainable economy. "
Asset managers allocate billions in investments on behalf of institutional investors, pension funds and individuals. Jesse: "The return on these investments is, of course, very important. But the realization that investments can have a major impact on people, the environment and society is increasing enormously. Institutional investors want to be able to assess the robustness of their investment portfolios in the light of current societal changes, such as global warming, growing scarcity of raw materials and population growth. In addition, they increasingly receive questions from stakeholders about the impact of their investments. This forces asset managers to find ways to measure the impact of their investment portfolios and report to their clients and other stakeholders. "
However, according to CISL's Dr Jake Reynolds, measuring the impact of investments at portfolio level remains a significant challenge for asset managers:
"Measuring the impact on one company on one specific theme is reasonably simple provided the requisite data are disclosed. It is a very different story however when a complete investment portfolio is examined across multiple sustainability themes. Low levels of data coverage, lack of familiarity with the underlying issues and an absence of standardisation render neat numbers and comparisons difficult. CISL's framework offers a solution to this problem in the form of six simple quantitative tests based on readily available data. The ultimate goal is to assess all portfolios on a common basis to bring clarity for investment clients and beneficiaries. Our collaboration with KPMG will help us advance the framework in the future as new data sources become available, including in the important area of social impact."
The online tool will be launched in autumn.
For more information, please contact Leonie Jesse, + 31 6 10 91 95 70.
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