by Charlie Tryon, Maris CEO
Billions of dollars are pouring into the ‘impact’ market. Institutional investors are committed to increasing allocations to sustainable strategies, shareholder activism focused on impact objectives is soaring, and at COP26 last month leaders made it very clear that we will keep 1.5 alive only with huge new private investment. Nearly 500 global financial services firms agreed to align $130 trillion – approximately 40 per cent of the world’s financial assets – with the climate goals set out in the Paris Agreement.
Fortunately this was accompanied by the launch of the International Sustainability Standards Board (ISSB) who will set global reporting standards and put an end to investors marking their own homework. At the moment disclosure frameworks are voluntary and often prohibitively expensive. Impact information is impossible to compare from fund to fund, country to country.
At Maris we have been measuring impact KPIs since 2009 when Dutch development bank FMO made their first investment. More indicators have been added over time and with the implementation of our Environmental & Social Management System in 2019 the scope widened. Next year we will start using bespoke ESG software to further refine impact measurement.
We know we are having positive environmental and social impact but we have never compared ourselves to the competition. So in recent weeks we surveyed impact claims made by eight of the top impact investment funds in sub-Saharan Africa to see how our figures compare. The results are heartening and depressing all at once. Depressing because, as previously mentioned, comparison is all but impossible. There is a complete lack of consistency in terms of what funds are measuring and how they are measuring it. Nominal figures lack context, often to the point of being meaningless – ‘litres of dairy products produced’ and ‘ferry passengers transported’ are two of the most random we came across.
The heartening bit is that, where we do have comparable data, Maris is achieving as much positive impact as our impact investor contemporaries (see dashboard, above) – if not more when you consider the nature of the markets and sectors in which we invest.
In rural Kenya and rural Zimbabwe we have created jobs where before there were none. At Equatoria Teak Company in South Sudan we have created jobs where before there was war. Some of our forestry staff used to be child soldiers and the employment and boost to the local economy we have provided has undoubtedly reduced conflict levels relative to the rest of the country. In south-west Tanzania we buy tea from roughly 14,000 small-scale farmers who would otherwise have no market.
All jobs are not created equal: salaried work for highly vulnerable communities in remote locations is far more impactful on poverty reduction and climate change resilience than white collar jobs in urban centres – but impact investment metrics do not capture this level of detail.
What I can’t tell you is whether impact investors are achieving as much financial impact as we are. By and large impact investors do not give their basic financial performance metrics the same visibility as the hotchpotch of impact figures, and that’s what makes me uncomfortable with the ‘impact’ label in its current form – I suspect it is often used to mask poor financial performance, or as a lazy route to new capital.
One investment banker I spoke to recently said ‘we stick an impact label on whatever we can and market it to our clients.’ Abraaj Capital, the infamous private equity manager that collapsed in 2019 amidst a shocking corruption scandal, pushed an ‘impact’ agenda to raise capital and enrich its senior partners, tarnishing the very essence of what responsible investors are trying to do. Hopefully the new set of standards promised by the ISSB at the end of next year will help prevent this happening again.
This doesn’t mean we aren’t driven to consistently improve the impact we have on the communities and the environments in which we operate. Adopting regenerative agriculture techniques at Agris, importing Kenya’s first new electric vans at META Electric, planting over half a million new trees at Equatoria Teak Company, and providing continued training and employment opportunities for young women at MMO in Mozambique are some of the recent measures we’ve taken to improve the welfare of our people and planet. At the start of next year we will launch a new ESG strategy and carbon inventory to identify areas for further improvement.
We are always working to improve the positive impact we have as a long-term investor with high tolerance for risk in challenging markets. We will continue to measure our impact in line with international standards and to tell the story of our impact journey. But we will not be rebranding ourselves as impact investors because ESG alone will not address the unprecedented systemic challenges we face – climate change, increasing debt burdens in the world’s poorest countries, the threat of another pandemic. ESG funds are ‘like selling wheatgrass to a cancer patient.’ says ex Blackrock CIO for sustainable investing, Tariq Fancy. “Corporate ESG efforts have negligible impact. Worse, its saintly narratives distract the public from seeing the need for aggressive, systemic reforms that only governments have the ability and legitimacy to pursue.”