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PODCAST: The developed world is bursting with impact investing opportunities

Think impact investing is only about solving problems in less-developed nations? You might be surprised to find opportunities in the developed world — such as water preservation. Regnan’s Tim Crockford explains in this fast podcast.

Listen to the podcast above or read the transcript below

Interview with Tim Crockford, head of Regnan’s impact investment team

Interviewer Sean Aylmer: Tim Crockford, explain exactly what impact investing is.

Tim Crockford, senior portfolio manager of Regnan Global Equity Impact Solutions Fund:
Impact investing is ultimately a form of investing where your investments are going towards companies that can solve problems relating to some of the major environmental or social challenges that we face globally

The idea behind the concept is if you can finance the companies that are trying to solve these challenges, ultimately these companies are able to come up with some pretty innovative and unique solutions for this set of problems, which of course is getting increasingly urgent to solve.

Interviewer: Why are we hearing so much more about impact investing now than say two years ago, let alone five years ago?

Tim Crockford: Good question. There are multiple catalysts, not least the Covid crisis we’ve all been facing over the last 18 months. That’s brought to light the effect of human activity and human economic activity. More generally we’ve got a number of underlying challenges which have been snowballing over the last five or 10 years. They are probably accelerating more recently since we’re getting to the stage that we can no longer procrastinate. We can no longer delay trying to address them.

Interviewer: What are the sectors or geographies where impact investing is most likely to play its greatest role?

Tim Crockford: It’s broad. It’s really across the board. The UN Sustainable Development Goals (SDGs) – when they were released back in 2015 – brought to light how some of the sustainability challenges that we face.

We tend to think of sustainability challenges as something for the more remote corners of the earth, in developing regions or frontier regions. But the interesting thing about the UN SDGs is they brought to light the extent to which some of these challenges are much closer to home to us.

You have issues like extreme poverty and improving social mobility which are typically challenges faced by some of the less-developed nations.

But if you look at challenges we face around waste and waste management and water, you’re talking about developing nations or indeed some of the most developed and mature countries.

So what’s increasingly changed over the last few years is this view that some of the major sustainability challenges are much closer to home.

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Regnan Global Equity Impact Solutions Fund

Interviewer: In some ways that must make them more investable.

Tim Crockford: Yes, absolutely. We’ve been talking a lot this year about water as one of the major issues that needs to be addressed sooner rather than later. When it comes to water transmission and water infrastructure, the biggest problem is in the most developed of nations like the US, the UK and Australia, where you have water infrastructure, that’s aged so much and has been in the ground for so many years.

And it’s facing challenges, for example leaking. If you look at the US there is this massive problem where the US grid system loses the equivalent of 4 million Olympic-sized swimming pools worth of water every year, just through infrastructure leakage.

So one of the challenges there is just plugging the holes and stopping that massive loss of water – which would otherwise be potable and going to more productive uses.

So that is a good example of something that is a challenge being met by companies that are investable in places like the US.

Interviewer: So if I’m thinking about investing impact investing in terms of portfolio construction, it’s not really a discrete part of my portfolio. It’s more tied to the different asset classes that I want to invest in?

Tim Crockford: That’s what we think. We don’t see this as something that should be niche or the cherry on the cake in people’s portfolios.

The vast majority of our clients tend to not have a specific allocation for sustainable or impact equity. The vast majority will place us in their broader global equity allocations. Ultimately the fund we are running (Regnan Global Equity Impact Solutions Fund) is a global equity fund.

Given the differentiated collection of equities that they get with our portfolio, when they put our portfolio together with their other global equity managers they get access to a collection of companies and stocks which otherwise wouldn’t typically be in your average global equity fund.

So there’s a have-your-cake-and-eat-I approach taken by a lot of our investors. They’re seeing an opportunity to get exposure to some of these themes and to allocate more of their portfolios towards sustainable and impact.

On the other hand, from a portfolio construction point of view, they’re getting a nice diversified and differentiated collection of companies which they otherwise wouldn’t be investing in.

Interviewer: We’re five weeks away from the 26th United Nations Climate Change Conference in Glasgow at the beginning of November. What sort of difference does a conference like that make to investing?

Tim Crockford: At the margin it’s another catalyst bringing to light the huge financing gap that needs to be plugged.  A lot of this is about raising awareness of just how much funding is required to solve some of these environmental, as well as social challenges.
But we are more likely around that time to be making a bit of noise, not just about the problem aspect, but about the solutions. Because from an investment point of view, the flip side of the coin is that this is a massive investment opportunity for those investors who are willing to get ahead of the curve.

This is a massive investment opportunity for investors who can see that this gap in financing exists and those early players – those investors that are early to the party – are going to be well-rewarded.

So it is an opportunity on one hand to bring the challenge and the problems to light, but for us it will be making noise about some of the solutions that exist and the opportunity side of things.

Interviewer: Tim, thank you for talking to Pendal newsletter The Point. That was Tim Crockford, lead of the Regnan Equity Impact Solutions team.

About Tim Crockford

Tim Crockford leads Regnan’s Equity Impact Solutions team and is senior fund manager of Regnan Global Equity Impact Solutions Fund. Tim previously managed the Hermes Impact Opportunities Equity Fund after co-founding the Hermes impact team in 2016.

About Regnan

Regnan is a responsible investment leader with a long and proud history of providing insight and advice to investors with an interest in long-term, broad-based or values-aligned performance.

Building on that expertise, in 2019 Regnan expanded into responsible investment funds management, backed by the considerable resources of Pendal Group.

The Regnan Global Equity Impact Solutions Fund invests in mission-driven companies we believe are well placed to solve the world’s biggest problems.

The Regnan Credit Impact Trust (available in Australia only) invests in cash, fixed and floating rate securities where the proceeds create positive environmental and social change. Both funds are distributed by Pendal in Australia.

Visit Regnan.com

Find out about Regnan Global Equity Impact Solutions Fund

Find out about Regnan Credit Impact Trust

For more information on these and other responsible investing strategies, contact Head of Regnan and Responsible Investment Distribution Jeremy Dean at jeremy.dean@regnan.com.

Regnan is a standalone responsible investment business division of Pendal Group Limited (Pendal). Pendal is an Australian-listed investment manager and owner of the J O Hambro Capital Management Group. Regnan’s focuses is on delivering innovative solutions for sustainable and impact investment, leaning on over more than 20 years of experience at the frontier of responsible investment. “Regnan” is a registered trademark of Pendal. The Regnan business consists of two distinct business lines. The investment management business is based in the United Kingdom and sits within J O Hambro Capital Management Limited, which is authorised and regulated by the Financial Conduct Authority and is registered as an investment adviser with the SEC. “Regnan” is a registered as a trading name of J O Hambro Capital Management Limited. The investment team manages the Regnan Global Equity Impact Solutions (RGEIS) strategy, which aims to generate market-beating long-term returns by investing in solutions to the world’s environmental and societal problems. The RGEIS strategy is distributed in Australia by Pendal Fund Services Limited. Alongside the investment team is the Engagement, Advisory and Research (EAR) team of Pendal Institutional Limited in Australia, which has a long history of providing services on environmental, social and governance issues. While the investment management team will often draw on services from and collaborate with the EAR team, they remain independent of the EAR team and are solely responsible for the investment management of the RGEIS strategy. The Regnan Credit Impact Trust (available in Australia only) invests in cash, fixed and floating rate securities where the proceeds create positive environmental and social change. Regnan Credit Impact Trust is distributed in Australia by Pendal. This article has been prepared by Pendal Fund Services Limited (PFSL) ABN 13 161 249 332, AFSL No 431426 and the information contained within is current as at August 18, 2021. It is not to be published, or otherwise made available to any person other than the party to whom it is provided. PFSL is the responsible entity and issuer of units in the Regnan Global Equity Impact Solutions Fund (ARSN 645 981 853). A product disclosure statement (PDS) is available for the Fund and can be obtained by calling 1800 813 886 or visiting www.pendalgroup.com. You should obtain and consider the PDS before deciding whether to acquire, continue to hold or dispose of units in the Fund. An investment in the Fund is subject to investment risk, including possible delays in repayment of withdrawal proceeds and loss of income and principal invested. This article is for general information purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. It has been prepared without taking into account any recipient’s personal objectives, financial situation or needs. Because of this, recipients should, before acting on this information, consider its appropriateness having regard to their individual objectives, financial situation and needs. This information is not to be regarded as a securities recommendation. The information in this article may contain material provided by third parties, is given in good faith and has been derived from sources believed to be accurate as at its issue date. While such material is published with necessary permission, and while all reasonable care has been taken to ensure that the information in this article is complete and correct, to the maximum extent permitted by law neither PFSL nor any company in the Pendal group accepts any responsibility or liability for the accuracy or completeness of this information. Performance figures are calculated in accordance with the Financial Services Council (FSC) standards. Performance data (post-fee) assumes reinvestment of distributions and is calculated using exit prices, net of management costs. Performance data (pre-fee) is calculated by adding back management costs to the post-fee performance. Past performance is not a reliable indicator of future performance. Any projections contained in this article are predictive and should not be relied upon when making an investment decision or recommendation. While we have used every effort to ensure that the assumptions on which the projections are based are reasonable, the projections may be based on incorrect assumptions or may not take into account known or unknown risks and uncertainties. The actual results may differ materially from these projections.

The Target Market Determination (TMD) for the Fund is available at www.pendalgroup.com/ddo. You should obtain and consider the PDS and the TMD before deciding whether to acquire, continue to hold or dispose of units in the Fund.

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