Chapter 9: Impact Investing – A Sleeping Radical?

Through its effect on the cost of capital, impact investing has the potential to improve the pricing of externalities, reducing the current overproduction and consumption of goods with negative social and environmental impacts and stimulating production and consumption of goods with positive social and environmental impacts. For this potential to be realised, the design of impact investing needs to be better aligned with portfolio management in two respects: (1) it needs to be possible to assess the impact of both asset classes and individual assets and (2) the analysis of the characteristics of assets needs to be separated from the use of mandate-related screens.