By Jonas Wäingelin, NordicInvestor
Wellington Management’s impact investors have a dual goal: deliver competitive financial returns with portfolios that offer shareholders the opportunity to make the world a better place. We did a Q & A with Tara Stillwell and Campe Goodman who manage Wellington´s impact equity and impact bond portfolios to discuss their passion for impact investing, investment objectives, collaborative approach and vision for the future.
What excites you about impact investing?
Campe: The ability to work toward our twin goals of generating strong investment returns and positive social and environmental impact is extremely gratifying. I’ve been a fixed income investor for 20 years and, even five years ago, nobody was talking about impact bonds. Absolutely nobody. So the growth of interest is also very exciting. It is my hope that eventually people will just think of “sustainable investing” as investing.
Tara: We’re passionate about helping our clients align their values with their investments and investing in companies and issuers that are making the world a better place. I’ve always believed that financial markets are the engines of economies, and they ultimately have significant impact on society. Being involved in finance, and certainly in impact investing, enables us to have a positive impact in direct and important way.
What is the philosophy of Wellington’s impact approaches?
Tara: We aim to generate competitive financial returns by investing in innovative companies and steering capital towards projects that address some of the world’s greatest social and environmental challenges. We think the public markets have an important role to play in supplying necessary capital, as governments, nongovernmental organisations (NGOs) and philanthropies may not be enough.
What are your impact investing themes?
Campe: We invest in 11 themes. These include life essentials such as affordable housing, clean water and sanitation and health and sustainable agriculture/nutrition. They also include human empowerment issues like the digital divide, education and job training, financial inclusion and safety and security. Finally, we invest in environmental themes of alternative energy, resource efficiency and resource stewardship.
How do you select investments for the portfolios?
Tara: The main lens is our criteria for determining impact. Within equity, at least 50% of a company’s revenue from its products or services must address one of our impact themes. The impact must not easily be addressed by other means, and we must be able to measure and track impact progress and outcomes. From there, we seek attractive company fundamentals, including robust assets, positive industry structure, a track record of smart capital allocation decisions and positive environmental, social and corporate governance (ESG) practices.
Campe: For fixed income, we have similar criteria. We aim to create our universe of impact issuers by setting a high bar for inclusion. After that, it is a relatively straightforward process: we construct the portfolio that we think is going to have the risk/return characteristics we are looking for.
What do you think is Wellington’s advantage in impact investing?
Tara: We believe our competitive edge is a combination of our experience and our collaborative approach. We both have extensive portfolio management backgrounds. Perhaps even more important in the impact context is the collaboration among our teams and across our global bench of equity, credit, ESG and macro analysts. The recent merging of our impact equity and bond teams has been incredibly valuable. We think this cross-asset synergy enables us to source more opportunities and analyse potential impact investments in an even more rigorous manner.
Campe: I agree. While I am responsible for the overall direction of the impact bond portfolio and for every buy and sell decision, our seven-member team takes full advantage of Wellington’s resources across asset classes and specialties. When we want to know what impact bonds are available to us in emerging markets, for example, we speak with our team of emerging markets specialists.
How might impact investing evolve over the next few years?
Tara: We believe our opportunity set will continue to expand. The problems impact companies are addressing will take many years to overcome, even with capital from public markets. As more asset owners realise they can help solve major issues while potentially earning competitive returns, the more demand there should be for these strategies. Recently, the coronavirus pandemic has laid bare many glaring social and environmental inequities that need to be solved, including, of course, access to health care. We expect to see more innovative technologies designed to address impact challenges.
Campe: We are seeing more issuers overall, as well as issuers aiming to package some of their activities as impact investments. As Tara said, demand is growing. Because global needs are so great, we should see more investors enter the space. Hopefully, if people see strong returns, they will gain confidence that they can meet both their investment and their impact objectives. I also expect impact measurement and standards to evolve. We want to be sure our reporting is as accurate and transparent as possible. One thing that won’t change is our twin goal of generating competitive returns and having a positive impact.
