What differentiates good music from excellent music? Maybe not the talent or the technique of each individual musician, but the soul that emanates from the ensemble. In our approach to impact investing, purpose and intention are primary. We invest with the aim to bring positive change in environmental and social areas. And we make sure our results are real.
Impact investing: investing with a purpose
When good music is performed by talented artists executing a nicely written piece, you surely spend an enjoyable moment. But when soul overtakes technique – that is when you get magic. That is when music truly resonates with you and what makes you remember a piece long after the concert ended.
By definition, impact investing has this ambitious goal to deliver both financial returns and environmental and/or social impact. Our approach of impact investing is fully aligned with this: when we invest in a fund, which in turn invests in companies, we act on our commitment to support the sustainable transition of our world with the aim to tackle the threat posed by resource scarcity. Thus, we select long-term projects promoting access to healthcare and education for all. We also finance companies that aim to implement efficient supply chain management, ambitious carbon reduction, and improved waste management strategies. Finally, we finance disruptive and innovative solutions that seek to accelerate the transition. We focus on companies that, like us, have integrated the urgency of change in their business model.
Keeping impact at the core of what we do is a way to ensure that our investment strategy is intentional, and that its positive societal and/or environmental impact is replicable. Our “soul” stems from all stages of our investing approach: starting with the extra-financial due diligence we conduct, followed by the quantification of the impact results through defined and measurable KPIs, and strengthened by our alignment through the carried interest.
See below how our due diligence process integrates this focus at all stages:
Source: Candriam
Investing with soul, but making sure the impact is real
All investments we make have predefined impact objectives, and we ensure that these objectives are clearly defined, measured and monitored. We also maintain a very close relationship with our investees and act as a sustainable advisor: challenging, advising and supporting them through their sustainability and impact journey.
Our impact committee, comprising investors’ representative and independent experts in relevant impact fields if needed, validates the Impact investment thesis, its KPIs and expected outcome.
For example, one of the funds in which we are invested fosters the development of a French industrial SME’s 4.0 medium size companies based on growth projects within a decarbonization target of 25% reduction thus aiming to create economic, social, environmental and financial value.
Another one of our underlying funds invests in companies led by entrepreneurs that create disruptive sustainable solutions away from fossil fuel, based on a strong differentiation, strong IP across Agriculture, Food, Chemicals and Materials sectors to help address major environmental challenges like climate change, biodiversity and food waste.
As we require underlying funds and companies to align their objectives to the SDGs, we can aggregate all data and map our impact at the fund level. We monitor precise and concrete impact measures in each area:
Non-exhaustive selection of KPIs followed:
With a clear view of our underlying funds’ KPIs and achievements, we are in turn able to report on our impact at the fund level.
Quantification of impact thus transpires at all steps of our approach: from fund selection through our Due Diligence questions to the potential investees, to the impact data that we require from our underlying funds to our own reporting to investors.
Committed and aligned all along the process, for an ambitious purpose
Commitment does not stop at the investment process phase. We have placed this principle of alignment of interest at the center of our own remuneration, as an investment team. The Fund’s carried interest is linked to social/ environmental goals. In other words, the team is financially incentivized to meeting both financial and non-financial targets are met. If we cannot deliver the expected impact, the carried interest fee will be donated to a non-profit group. This is how we concretely align our acts with our intentions.
All stakeholders are thus aligned on common principles, and it is our duty to ensure both full transparency and outstanding integrity while selecting and allocating investments. Our task is important: finance great projects with the aim to positively contribute to a sustainable future.
----
Soundpost
For string instruments, the soundpost is a small spruce dowel joining the front and back surfaces, which supports the bridge while allowing the whole body of the instrument to vibrate.
In French, they call it ‘l’âme’, which also means the soul.
Yehudi Menuhin knew how to touch both: make the violin vibrate and move our soul.
----
All our investment strategies involve risks, including the risk of loss of capital. The main risks associated with the strategy are: Risk of capital loss, Equity risk, Interest rate risk, Credit risk, Liquidity risk, Concentration risk, volatility risk, leverage risk, ESG Investment risk
ESG Investment Risk: The non-financial objectives presented in this document are based upon the realization of assumptions made by Candriam. These assumptions are made according to Candriam’s ESG rating models, the implementation of which necessitates access to various quantitative as well as qualitative data, depending on the sector and the exact activities of a given company. The availability, the quality and the reliability of these data can vary, and therefore can affect Candriam’s ESG ratings. For more information on ESG investment risk, please refer to the Transparency Codes, or the prospectus if a fund.
