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is included in a well-known sustainability fund, the company’s reputation and competitiveness might improve, which increases the positive company impact. ▪ Engagement: In the case of engagement, improved reporting on greenhouse gas (GHG) emissions, for instance, does not directly improve the portfolio impact. However, transparency allows customers to deliberately choose climate-friendly products and, this way, create a positive company impact. Or if a company, as the result of active ownership pressure, improves its climate intensity by merely selling an energy-intensive production facility, the portfolio impact improves, but not the resulting company impact. This shows that, firstly, impact assessment and impact-orientation is a prerequisite for a positive investment impact, regardless of the lever chosen for investor impact – be it capital allocation or active ownership. Secondly, systemic effects must be considered to achieve a positive company impact. They must be deliberately included into active ownership processes and into the impact assessment of related activities. In the case of capital allocation, a considerable market power is needed to maintain the price effect.
2.3. How to assess capital allocation contributions to sustainability To assess the capital allocation effect of sustainability funds we used impact assessments as dependent variables instead of other alternative measurements for the following reasons: Impact assessments In our opinion, impact assessments are best suited to the question of whether capital is being channelled into economic activities that make an effective contribution to sustainable development. Impact assessments reliably reveal whether investee companies have future-oriented business models and processes in place. By including strategies, goals, programmes and structures into the impact assessments, impact assessments also show if companies are continuously improving in terms of sustainability and are therefore on the right track. Suitable impact assessments should fulfil the following requirements (see chapter 5.1.1 for further details): (a) The underlying approach must be reliable. This means that it must have a sound conceptual and scientific basis and evaluate the contribution of companies to sustainable development in a holistic way. (b) Impact assessments must be comprehensive, i.e. cover entire product life cycles and economic sectors or economic activities in the economy, and (c) pragmatic, i.e. the impact assessment must be possible despite the limited existing publicly available data.
INFRAS | 3 May 2021 | Summary
