Holistic portfolio construction with an impact lens: A vital approach for institutional asset owners in a changing world
This report highlights the importance for Institutional Asset Owners (IAOs) to apply an impact lens approach to their portfolio construction. By creating impact philosophies and policies, IAOs can align impact thematic(s) and drive an evolution towards providing both impact and financial returns to their beneficiaries.
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OVERVIEW
This report highlights the significance of creating impact philosophies and policies to redefine one’s portfolio strategies. Through a holistic approach and integrating an impact lens overlay, Institutional Asset Owners (IAOs) can adapt to current market trends and create impact and financial returns suitable for the beneficiaries.
The report emphasises the need for IAOs to apply a consistent set of impact returns from investments and recognize social and environmental impacts on portfolio value. It is crucial to develop an impact thesis or theory of change that addresses social and environmental priorities in a focused set of impact priorities, required for holistic portfolio construction.
Applying an impact lens includes four phases: (1) examine the portfolio, (2) choose strategies that drive an evolution toward a holistic approach, (3) align impact thematic(s) that matter, and (4) apply an impact lens across the portfolio. By applying this approach and considering the underlying environmental, social, and governance risks and opportunities, IAOs can create an investment process that seeks to integrate impact returns in alignment with beneficiaries’ interests.
IAOs need to understand how their contribution influences the overall impact performance and be able to measure and manage their impact using impact performance indicators. The report suggests measuring and managing impact with indicators such as carbon footprinting.
In conclusion, the report makes clear that an impact lens overlay is essential for IAOs to adapt and thrive in an ever-changing market. By integrating an impact lens within their investment strategies, IAOs can align their work to contribute to a more resilient and sustainable world for all.
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SDGs
SASB Sustainability Sector
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RELATED TAGS
- evolutionary approach
- financial performance
- holistic portfolio construction
- impact goals
- impact investing
- impact lens
- impact measurement and management
- impact priorities
- impact thesis
- institutional asset owners
- investment outcomes
- investment philosophy
- investment thesis
- market analysis
- responsible investing