ESG Clarity held its second live expert Q&A session on Twitter on 16 July with the Professor Vikram S. Gandhi, senior lecturer at Harvard Business School (HBS) and impact investment expert.
Professor Gandhi has developed and teaches HBS’s first course on impact investing and has 23 years’ experience in investment banking where he influenced and informed the ways that impact investing has shaped investors’ responses to global markets.
He is the founder of Asha Impact, an impact investing platform set up by socially conscious individuals to leverage combined capital, networks and expertise to address critical development challenges facing India and other emerging economies and is also a senior advisor to the Canada Pension Plan Investment Board (CPPIB).
Readers from around the world posed questions surrounding impact investing to professor Gandhi on Twitter on topics such as diversity, corporate profits and ambitions, and new US pension fund rules.
We have collated all the questions and answers below for readers to view in one place.
What’s the best way for advisers to evaluate whether an investment is making more of its ESG attributes than it should?
VG: Greenwashing is an issue, though more stringent standards are being developed by various agencies to deal with this, particularly in Europe. Hopefully, other countries will follow. I don’t think we will completely get rid of this issue BUT let not perfect be the enemy of the good!
How can we better engage governments to look at the impact investing sector and give them an impetus just like they do for startups and unicorns?
VG: We need some important sponsors in government to embrace this. Governments are by far the biggest impact investors. Showing them that outcome-oriented expenditure will lead to higher impact is critical.
Have you found that sentiment has changed towards impact investing since Covid-19?
VG: A lot more focus on the “S” part of ESG/Impact. Importance of employee policies and community engagement.
New proposed rules in the US will make it difficult for pension funds to invest in ESG funds, but taking the fiduciary responsibilities into account, should/must investors invest in ESG funds?
VG: Fiduciary obligations are very important and should not be compromised. I would argue that by not incorporating ESG into the analysis, trustees will not be fulfilling their fiduciary obligations.
Outside of the US, how has the investment of retirement assets been important to the overall uptick in ESG investing?
VG: In Europe and Australia, retirees and government policy encourage it. For example, I believe that in France, retirees can construct their own “ESG” portfolio for part of their assets.
Is it sufficient to compare the progress of a business quarterly and yearly with its own performance on the 17 sustainable development goals of the UN? Or do you see more value in benchmarking businesses for industry performance and getting rated, like other frameworks?
VG: As disclosure becomes more prevalent and required, benchmarking to an industry and peers should happen. Just like financial performance is compared. I believe we will get there in the not too distant future.
Do you think impact will become as important as profits for corporates in years to come?
VG: The “purpose of the corporation” and a move to “stakeholder capitalism” is being widely discussed at the Board level, so I believe we will move in that direction. One should think of it as just good business.
Asset managers spend a lot of time looking at their funds as to whether they meet ESG criteria but their own corporate ambitions seem much tougher to analyse and validate. Do you expect this to change? How will this materialise?
VG: For asset managers, the S and the G are probably more important. And on balance they have not done a good job on these. For example, only 3% of hedge fund assets are managed by women. And as they put pressure on their investee companies, they will need to “walk the walk” themselves. So I am hopeful …
How do you think our industry can encourage greater diversity into this space?
VG: The level of interest among younger folks in sustainability has risen exponentially over the last few years. We see that at Harvard Business School and other business schools so hopefully the pipeline of talent will only increase over time.
Also, I believe that in the not too distant future sustainability will be incorporated in everything we do as opposed to being a separate issue.
