John Bai, SVP and chief investment officer at NEI Investments, describes 2020 as “a watershed year in many ways. Things changed from a health and environmental perspective, and in so many other ways. Not only did we have a health pandemic, we also had urgent calls for social justice from Black Lives Matter and other organizations, and a climate change crisis. That’s why I think we’re seeing such an interest in ESG. Clients are not only focused on how much money they make, but really how they make their money.”
That’s where impact investments come in. “These are investments that are made with the intention to generate positive, measurable social and environmental impact, alongside a financial return,” Bai explains. “We break this down into the three necessary components of impact: intentionality, meaning the investments seek to generate a positive social and/or environmental impact; measurability, or measuring that positive impact; and then finally, we want to see a financial return that’s in line with broader markets. More than ever, clients want to align their values with the way they invest – and we have the investment resources and tools to help them.”
These tools include the NEI Global Impact Initiative, Canada’s first suite of global impact funds offering a choice of fixed income, balanced and equity mandates to meet a range of investor risk profiles and investment needs. Consisting of three funds co-developed with Impax Asset Management and Wellington Management, the Impact suite features the NEI Global Impact Bond Fund, NEI Global Sustainable Balanced Fund and 5-Star Award winning NEI Environmental Leaders Fund.
“First and foremost, from an equity perspective, the fund invests in companies that are providing solutions to resource scarcity,” Bai says. “This includes solutions for energy efficiency, renewable energy, waste, sustainable food and so on. This is a very intentional strategy as the world transitions to a much more sustainable economy.
“I think one of the unique attributes of the Environmental Leaders Fund is our commitment to measuring our positive impact on an annual basis. Our impact reports are all audited by a third party, so the impact measurements are objectively assessed. There’s a very high level of accountability and transparency, built on the highest level of our commitment to responsible investments that also deliver strong returns.”
And in terms of that positive impact, the results speak for themselves.
“In 2020, for instance, NEI Environmental Leaders Fund had a net CO2 impact of avoiding almost 48,000 tons of CO2, which was the equivalent of taking over 10,000 cars off the street,” Bai says. “We saved 8.37 billion gallons of water, equivalent to the water consumption of almost 77,000 households.
“When it comes to fixed income impact investing, we didn’t want to restrict ourselves to labelled bonds or the more traditional ‘sustainability linked’ bonds, because that’s just a very narrow definition. We engaged Wellington as a subadvisor because of the firm’s expertise and specialized approach in determining whether bonds have a positive or negative impact. We want to be able to say that we offer investments through subadvisors like Impax and Wellington that can actually measure their positive impact, while at the same time delivering all of the traditional analyses as well. We need to ensure strong portfolios through strong security selection.”
And, Bai adds, it’s precisely this fusion of professional considerations with socially responsible values that makes impact investing such a great prospect. “We want to make investments that are part of the solution to creating a much more sustainable economy and a much more sustainable world.”
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