As the number of socially responsible investment funds grows, there are growing suspicions about just how sustainable these investments truly are. Consumers, regulators and other external stakeholders are asking more and more questions about the real sustainability of investments.
Some fund managers and institutional investors answer several of these questions by using their own methodologies to label certain investments as more sustainable and/or to demonstrate aspects of the impact of their investments (e.g. carbon footprint).
These methods have enabled them to make certain statements regarding the environmental and social impact of investments such as global warming, biodiversity decline and child labor. But they fall short of providing insight into the impact of the portfolio on a wide range of issues. In other words, they fail to provide the level of transparency that would enable stakeholders to assess the sustainability of their portfolios.
Providing insight into the overall impact of investment portfolios is challenging because there is often no data on the impact of the investments held in the portfolio (companies). The need for a framework that deals with these challenges is growing, and recently the Cambridge Institute for Sustainability Leadership (CISL) developed a framework that provides a solution.
For more information, please contact Leonie Jesse, associate director Sustainable Finance.