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Sarah Norris, Investment Director for the Global Sustainability Trust, explains how impact opportunities are evaluated and monitored.
What are areas in which the Global Sustainability Trust is looking to deliver positive impacts?
The Global Sustainability Trust is looking to help accelerate the United Nations Sustainable Development Goals so its remit is extremely wide-ranging -from helping to alleviate poverty and hunger and tackle climate change to advancing education and gender equality.
For investment purposes we’ve consolidated the 17 UN SDGS into eight ‘impact pillars’ including sustainable energy, food and agriculture, water and sanitation, health and social care, and education and employment.
Our aim is to help deliver positive social and environmental impacts across all these areas by directing capital to opportunities in private equity, real estate, infrastructure, natural resources and private credit.
How do you identify opportunities and assets that may be suitable for the Global Sustainability Trust?
Our process is focused on intentional investment. In other words, we are looking for opportunities that have embedded into their business model an intention to deliver a very specific positive impact. So that could be a private equity firm that’s focused on financing innovation in the so-called circular economy to improve resource reuse and recovery; a microfinance company that’s providing small loans to low-income female entrepreneurs in Asia and Africa who can’t access traditional banking; or a direct investment into a renewable energy project in Scandinavia.
We work with the wider private markets teams in Aberdeen Standard Investments to see what opportunities they are coming across in private equity, real estate, infrastructure and natural resources that may be attractive to the Global Sustainability Trust. We then evaluate them on a financial and non-financial basis to determine if they can meet our dual aims of delivering a good long-term financial return and well as a positive impact.
How will you evaluate a potential investment’s ability to deliver on its intended impact?
We map intentionality through every stage of investment. At the outset, that involves looking at how we intend the capital to be used versus how the asset intends to use the money. We then set specific milestones and indicators for an asset to achieve.
For example, you might have a financial services company seeking to improve financial inclusion in a developing country or region. So we might ask: What are the services you’re providing? How many customers do you expect to sign up? What do you expect the impact to be? Is this a debt reduction programme? A financial literacy programme? What insurance are you providing and how will this affect customers’ lives? It all comes back to a contextual analysis of where is the asset located, what are the needs of that geographic area and how is the asset addressing those needs.
By defining the outcomes at the start, we have more confidence that we can deliver measurable social and environmental impacts.
How will you report to investors in the Global Sustainability Trust on the impact their investment is having?
We’ll look to offer a number of levels of reporting. So at the top level, we’ll look to report annually on how assets have achieved the different milestones that we’ve set for them or how they’ve perform against specific indicators - whether that’s lives touched by financial inclusion services, carbon emissions saved by a renewable energy project, or total amount of waste recovered by an innovative recycling enterprise.
But we’ll also look to go beyond these round numbers. So for example, we’ll profile how an asset is progressing through our theory of change model, examining intentionality, implementation and impact. Then we can draw detailed conclusions about its potential and actual outcome. So the aim is to offer various layers of analysis to suit how deep an investor wants to go.
What will happen if an investment isn’t achieving its intended impact?
Hopefully that won’t happen because we’ll have done our due diligence on an investment and set very clear milestones on our own intentionality at the very outset. But if an investment is not delivering on its milestones, we’ll go back and analyse why. If we don’t see a path for that investment to return to those milestones it means something has changed and it’s no longer appropriate, so we’d look to exit from it. By using very accurate measurement and being very clear about the indicators that we want to see right from the outset, we are far less likely to hold onto assets that aren’t delivering.
Do you envisage a time when investors will value an investment fund’s social or environmental impact as much as its financial return?
We’re already seeing it happen. From talking to wealth managers, pension funds and so on, we know there’s a huge appetite among investors for investment opportunities that align with their values. People want to use their capital to be able to effect change. I’m confident that, in a few years, targeting positive social and environmental impacts as well as a good financial return will be viewed as a completely mainstream way to invest.
Iportant Information
Risk factors you should consider prior to investing:
The value of investments and the income from them can fall and investors may get back less than the amount invested.Past performance is not a guide to future results.The Company’s investment portfolio may not achieve the desired positive measurable environmental and/or social impact.The Company’s investments are inherently illiquid.Investment in the Company may not be appropriate for investors who plan to withdraw their money within 5 years.There is no guarantee that the market price of the Company’s shares will fully reflect their underlying Net Asset Value.An investment in the Company is only suitable for investors who are capable of evaluating the merits and risks of such an investment? and who have sufficient resources to bear any loss which might result from such an investment.
The success of the Company will depend, amongst other things, on the Investment Manager’s ability to identify, acquire and realise investments in accordance with the Company’s investment objective and policy. This, in turn, will depend on the ability of the Investment Manager to apply its investment processes in a way which is capable of identifying suitable investments for the Company to invest in. There can be no assurance that the Investment Manager will be able to do so or that the Company will be able to invest its assets on attractive terms or generate any investment returns for Shareholders or avoid investment losses.The Company is an alternative investment fund for the purposes of the AIFM Directive and has appointed Aberdeen Fund Managers Limited as its alternative investment fund manager.
Domicile and legal form: The Company - The Global Sustainability Trust plc was incorporated and registered in Scotland on 17 April 2018 as a public company limited by shares under the Companies Act with registered number SC594582.
Typical investor
The Directors believe that the typical investors for whom an investment in the Company is appropriate are private investors and institutional investors investing for capital growth and seeking exposure to a diversified global portfolio, primarily consisting of Private Market Investments, which aims to create positive measurable environmental and social impact. An investment in the Company is only suitable for persons capable of evaluating the risks and merits of such an investment and who have sufficient resources to bear any loss which may result from the investment. Potential investors should consider with care whether an investment in the Company is suitable for them in the light of their personal circumstances and the financial resources available to them.
Investors may wish to consult an independent financial adviser who specialises in advising on the acquisition of shares and other securities before making an investment.
The AIFM and Investment Manager
Under the terms of the Management Agreement, the Company has appointed Aberdeen Fund Managers Limited as the Company’s alternative investment fund manager for the purposes of the AIFM Directive. The AIFM has delegated portfolio management to Standard Life Investments Limited as Investment Manager.
Other important information:
Issued by Aberdeen Asset Managers Limited which is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Registered Office: 10 Queen’s Terrace, Aberdeen AB10 1XL. Registered in Scotland No. 108419.
An investment company should be considered only as part of a balanced portfolio. Under no circumstances should this information be considered as an offer or solicitation to deal in investments.
Aberdeen Standard Investments is a brand of the investment businesses of Aberdeen Asset Management and Standard Life Investments.
We recommend that you seek financial advice prior to making an investment decision.
For more information, please visit http://www.globalsustainabilitytrust.co.uk/
