Understanding Responsible Investment #10 - Focus on impact investment

Dorothée Chapuis: Hello everyone and welcome to the tenth episode of our "Understanding Responsible Investment" podcasts series. I am Dorothée Chapuis, Head of CSR for Société Générale Private Banking Luxembourg, Monaco and Switzerland. In this episode we will look at impact investing and I am very pleased to welcome today Max Thillaye du Boullay, an expert in philanthropy and Managing Director of the Societe Generale group Foundation.

Dorothée Chapuis: Max, in the context of your activity, you are led to select general interest organisations that all pursue a social or environmental goal. I've often heard you talk about impact; can you please come back to this notion?

Max Thillay du Boullaye: Hello, Dorothée. Yes, the notion of impact is not always easy to grasp and it is often confused with activity monitoring. I am used to defining impact as the final effect that an action produces on beneficiaries, an effect that will have been sought in advance and that responds to a clearly identified issue. For example, for young people dropping out of school, the desired effect will be to put them back into a life project (study or job), or for people leaving prison, the desired effect will be to reintegrate them into the working world. Moreover, one of the keys to impact is its measurement. Let's return to our example of the fight against dropping out of school, a theme that is particularly close to my heart. In this area, a relationship has been established between children who had no future plans or who could not plan for a career and the likelihood of them dropping out of school. An association that we support at the Foundation identified that one way to give them back the desire to learn was to put them in contact with professionals who are passionate about their profession. This organization sets up very powerful testimonial sessions in the colleges, conducted by professionals several times a year. The measurement of the impact that we defined together is to verify that the action did indeed have a long-term impact on the dropout rate. To make this observation, we can compare the situation of children with a certain profile who would not have benefited from the association's action with that of children with the same profile who benefited from it. The measurement of activity includes the number of children who benefited from the testimonies, for example, or the number of people who testified.

Dorothée Chapuis: Very clear, Max, thank you very much. Your explanation is invaluable to us. Let's see how it fits into the impact investment area...

Max Thillaye du Boullay: Indeed, there are more and more investment products that talk about impact. The definition given by the GIIN, the Global Impact Investing Network, is very clear: they are investments made with the intention of producing a measurable social or environmental impact as well as financial profit. In addition to financial return, impact investments are characterized by three words: intentionality, "additionality" and impact measurement. Let's look at each of these three terms. The intentionality of investors is the fact that they identify a cause to be solved through their investments. For example, the cause of professional integration, or the fight against poor housing. Additionality means that the provision of financing by the investor enables the impact to be achieved, and that without it, the desired effect on the beneficiaries would not have been possible. For example, by providing so many financial resources to the reintegration into the working world program, will enable to reintegrate so many more people. And the impact measurement, as we have seen, concerns measurement elements, not always easy to characterise, according to the nature of the project. These three criteria make it possible to distinguish impact investment from thematic investment, which is one of the approaches of Socially Responsible Investment (SRI). In thematic investment, the aim is to invest in companies the activity of which covers one or two areas of sustainable development. For example, in thematic products in the water sector, companies are selected and financed that operate globally to improve access to water, to save it, to make it drinkable, etc. If the intention of the investor is to enable to give access to water to people who are deprived of it, it can indeed be thought that the selected companies partly fulfil this objective. However, it will be difficult to prove additionality, i.e. how the capital provided was actually used to provide access to water to more people who are deprived of it. The capital may also have been invested in another area, such as the replacement or maintenance of existing networks. And it will be even more difficult to give a measurable impact to the desired effect, i.e. to bring clean water to those who are deprived of it. In summary, it can be said that for the same social effect, thematic investment suggests that it may be achieved in a diffuse and non-measurable way, whereas impact investment will prove it. These impact investments are not yet accessible to individuals because the associated risks are significant and multiple. At Societe Generale Private Banking, we want to accompany our clients in the area of impact and are currently exploring all avenues to offer robust solutions that help finance a more sustainable economy while having a risk profile in line with their expectations.

Dorothée Chapuis: Thank you again, Max, for your insights. Thanks to you, we have seen that the logic of impact in the area of general interest can be extended to the area of investment. Goodbye and see you soon!

Max Thillaye du Boullay: Please Dorothée, the pleasure was all mine, goodbye!

Dorothée Chapuis: In the next episode we will see another very interesting theme: the calculation of portfolio temperatures.

This podcast is part of a series of episodes proposed by Societe Generale Private Banking to understand responsible investment. It is available on the Spotify and Apple Podcasts streaming platforms via the "#Private Talk by Societe Generale Private Banking" program and on our website www.privatebanking.societegenerale.com. Feel free to subscribe to be notified when the next episode is released and to spread the word.

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