RISK - Agents for impact

RISK

We believe that impact and sustainability require a strategic approach just like any other business or financial objective. They must be integrated into an organization’s structure, processes and culture – bearing in mind that they translate into both risks and opportunities, with positive and negative impacts.

Across AFI and in our partnerships with financial institutions, RISK addresses sustainability risks as well as sustainability-related regulatory developments (such as the EU Sustainable Finance Action Plan), raising awareness and understanding of the emerging landscape of ESG-related regulations and their implications for both investors and PFIs as their investees. For example, in June 2022 we facilitated a webinar under the EaSI Technical Assistance Webinar Series organized by the Microfinance Conference (MFC) and co-funded by the EU. We aim to guide our partners to understand the interdependency of their impact objectives and their exposure to sustainability risks in order to manage them optimally.

ESG ratings are causing much confusion and criticism although many investors and financial institutions use them. How come that some companies can achieve a top rating and still have negative real-world impact? What are ESG-ratings all about if the results for one particular company can be so different? How can a basic understanding of the methodology prevent comparing apples and oranges?

These and other questions on ESG ratings have been discussed by Yannick Rust, Director of ESG Risks & Impact at Agents for Impact (AFI), in a podcast, where she gives an insight into practical examples, market trends and the value added of AFI. Please find the full interview here

Since 2019, AFI performs plausibility checks of ESG ratings for customers in the financial services industry like HANSAINVEST. Our expertise and experience with the Agents for Impact Sustainability Rating (AFISAR©) based on the SDGs represent an immeasurable asset in this respect.

Want to know more about ESG ratings and our sustainability services? Please contact Yannick Rust Director of ESG Risks & Impact yannick.rust@agentsforimpact.com!

The 2030 Agenda for Sustainable Development and the Paris Agreement (both adopted in 2015) as well as the European Green Deal call for a deep transformation towards an inclusive, socially just, carbon-neutral and regenerative economy.

The UN estimates that annually $2.5 trillion need to be mobilised to finance the Sustainable Development Goals (SDGs). And yet, the COVID-19 pandemic SDG Golas creates a massive setback in the realization of the 2030 Agenda for Sustainable Development. Amidst the health, economic and social impacts of the pandemic, financing micro, small and medium enterprises (MSME) remains an important vehicle to stimulate growth and socio-economic development. Among other effects, the COVID-19 crisis has caused a slowdown in microfinance activities and thereby threatens the financial inclusion of low-income populations. In this context, Impact Investing can significantly contribute to the solution of societal issues. In response to the effects of pandemic, at Agents for Impact we focus on exploring new opportunities and identifying strategic partners around the globe to support local entrepreneurship, encourage women empowerment and contribute to sustainable development.

The 2020 Annual Impact Investor Survey of the Global Impact Investing Network (GIIN) estimates the impact investing market to cover USD 715 billion. In fact, globally more and more investors are shifting their capital into impact investing, i.e. investments pursuing not only a financial return, but also a positive environmental and/or social impact. Evidence-based impact measurement is not only of the core characteristics of impact investing, but also serves as a starting point for impact management. Yet, due to its multidimensionality and complexity impact measurement poses a challenge to investors and investees.

As impact investors have to demonstrate the social and/or environmental impact of their investments (especially financial institutions subject to the EU Sustainable Finance Disclosure Regulation, SFDR), they also need an enhanced sustainability measurement, which is clear, reliable, quantifiable & comparable. Consequently, the financial sector is increasingly seeking data and evidence from their investees. In order to source funding from international impact-oriented investors, investees (such as microfinance institutions/MFIs) are well advised to provide evidence regarding their sustainability performance. Besides a roadmap towards a more prosperous and sustainable world by 2030, the SDGs are also offering a positive, common language advocating for social and environmental issues. This is where impact measurement comes into play to assess the status quo and pave the way to create even more positive impact.

As mentioned above, further capital needs to be mobilised to address the prevalent global challenges (such as climate change, persisting inequalities and a biii sustainable COVID-19 recovery) and finance the SDGs. In order to further strengthen the German Impact Investing ecosystem, we joined the Federal (German) Initiative Impact Investing (https://bundesinitiative-impact-investing.de/) as member and are co-leading its initiative “Impact Measurement & Management” (together with PHINEO) as a platform for impact practitioners to facilitate discussions about impact measurement approaches as enabler towards an impact-oriented economy and exchange of best practices.