Bert Scholtens about Impact Investing: 'Providing insight into the external effects'
|Date:||29 January 2019|
|Author:||prof. dr. Bert Scholtens|
“Information provision and generation have always been the force of financial institutions. This becomes even more important at Impact Investing, wherein the field is changing because of sustainability aspects.”
“Within Impact Investing the non-financial objectives are explicitly stated. It is part of Socially Responsible Investing (SRI). It does not solely concern achieving a certain financial return, but also is after specific non-financial performance. More specifically, environmental and social factors play a crucial role: investors want to create impact with their investments. For example, helping women to obtain a loan, making education more accessible or reducing C02 emissions are examples of non-financial aims.
Both companies and investors can express their social role and involvement by Impact Investing. Investors are normal people who often have non-financial objectives besides their financial ones. Many people want to do the right thing, they just do not know how to invest their money in a good way without the risk of losing it. For this reason, it is valuable to provide insight into the external effects of investing. In this respect, Impact Investing is transparent and recognizable. As a result, it increases the scope and possibilities of investing, even though the financial results may be less salient than in the case of traditional investments.
The research area of Impact Investing is complicated because investors’ motives and objectives are so diverse. Currently researchers mainly elaborate on how Impact Investing works and how you can optimize it. First of all, it is important to develop the concept and put the different motives and objectives into words and strategies. This goes along with ensuring that the non-financial objectives are realized. Thus, it is essential to know how to measure factors like health, education or equality. The gained knowledge can be shared among parties or investors who want to take part in this type of investing.
The Centre for International Banking, Insurance and Finance (CIBIF) helps determining how to analyze and balance financial and non-financial interests. This assistance can be useful considering that the addition of the sustainability aspects makes investing much more complex. Impact Investing is dependent on the personal values and needs of the investor and these differ for everyone. Thoughts on this type of investing are often too easy and within CIBIF we want to emphasize it is not that obvious as you might think.”
Bert Scholtens is professor in Sustainable Banking and Finance at the Department of Economics, Econometrics and Finance at the University of Groningen. Furthermore, he is a Finance Professor at the School of Management of the University of Saint Andrews, Scotland, UK. His research interests are in sustainable banking and finance, socially responsible investing, international financial intermediation, and energy finance.