Page 47 - DIY Investor Magazine - Issue 25

DO YOU HAVE TO GIVE UP PERFORMANCE TO ACHIEVE IMPACT?
Impact investing used to imply sacrificing financial
returns to achieve it, but I absolutely refute that now.
It is simply not the case and I have spent the last six and
a half years proving it. We don’t use a specialist benchmark, we use a conventional one, Non-gilts (which includes local authority, supranational and agency bonds). With around half the constituents of the non-gilt market, we can deliver a corporate bond return for corporate bond risk. At the same time we can stretch the target to compensate for the cost of active management, which we define as the difference between active and passive fees. In doing so we have beaten the index, and if you
want to get technical and look at the Sharpe Ratio – which washes through the complexities of the index for duration etc – we are delivering on a risk-adjusted basis. It is down to central government to deal with naysayers who say that people should pursue purely financial returns or philanthropy. Authorities are behind the curve and if they ever do catch up, I know which side
I would rather be on.
WHAT DO YOU INVEST IN?
Entities that don’t have equity, for example local authorities, universities, housing associations, charities and some that do including utilities. Much of what we are supporting are long-term infrastructure projects – hospitals, schools, university buildings, which need sustainable and appropriate funding for physical assets. There are secondary benefits too in achieving impact. For example these organisations provide employment and universities conduct research into cancer and other health issues.
We also finance good employers, such as John Lewis and Morrisons, who go about it ethically providing training or partnership. And those who provide the essentials of life – for example Glas Cymru, which owns, finances and manages Welsh Water. It is owned by its customers and operates solely to provide benefits to them. It’s the way, where and how they do it which provides the impact.
WHO ARE YOUR CUSTOMERS?
They tend to be retail investors.
Plus there is one local authority in the UK fund – it’s good to see they have a social conscience. Retail and institutional prices are the same – 30 basis points, a significant percentage of goes to The Big Issue.
WHAT ARE THE GROWTH PROSPECTS FOR IMPACT INVESTING?
One of our mantras is to bring social investing into the mainstream using a conventional asset class. It’s not scary. It’s just a corporate bond – a tradeable loan. There should be no real preclusion from issuing normal bonds to impact bonds. I can see no reason why it shouldn’t grow to the size of the corporate bond market.
HOW WILL THE COVID-19 PANDEMIC EFFECT IMPACT INVESTING?
It is truly a terrible thing to befall society. Yet it has shifted attention away from just the environment to a much wider set of issues, such as education, Social Housing, employment and health. These should be supplementary to the environmental focus rather than supplant it, and that would be a good thing.
WHAT EXCITES YOU AT THE MOMENT?
We have launched a campaign for a green gilt. A sustainable, social gilt could help pay for furloughing. If we get one, we will still campaign for more issuance as it won’t be enough on its own. We encourage issuers and banks, who are really important in this, as we need to influence them as aggregators to follow the money through to SMEs to see the impact. The idea is to facilitate borrowing big and lending small. We have helped the charities sector
in this regard, which enabled small and medium-sized charities to access finance as they are not big enough
to issue their own bonds.
WHAT WORRIES YOU?
Rainbow washing – it’s the new greenwashing. Companies just claiming to be aligned with Sustainable Development Goals when it should be at
the heart of what they do.
WHO HAS INSPIRED YOU?
I should mention George Peabody, the Victorian Philanthropist but in truth I was influenced by my parents, school and the people
I grew up with. My father, the son of a train driver, left school at
14 but went to evening classes, achieved his school certificates, then the CII and became a Fellow. He understood the importance of education and aspiration. He was my real hero.
HOW DO YOU RELAX?
I love the old technology of sailing – with pulleys and ropes – and am currently learning to navigate using a sextant by the stars. I am halfway through an MA in Naval History at Portsmouth University. My Uncle served under Johnny Walker – hunter of U-boats in sloops, in which both my uncle and my father served, coincidentally both operating a gun turret. I am a passionate supporter of Tottenham Hotspur Football Club. Given my day job I am also passionate about the new stadium, the impact it has and will have on the most deprived ward of Haringey. There are jobs and training offered through the foundation to help people interview for jobs at Sainsbury’s, for example.
47 DIY Investor Magazine | Sept 2020
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