In the age of sustainability impact investing and ESG (Environmental, Social, and Governance), the non-financial factors that investors apply to identify material risks and growth opportunities, have become buzz terms. But not for everyone. According to research from new investment fund manager DUGUUD, this industry jargon leaves many people mystified and this is holding them back from investing in businesses that help the environment and society.
The survey of 3,000 adults found that just 10% were aware of the term impact investing and could explain it, yet when it was explained to them 60% agreed that it could create positive change in the environment and society. And three times more people agreed than disagreed that if they had funds to invest, they would want to invest in this area.
“It’s time for the whole financial services industry to ditch terms like impact investing and ESG and to start talking in a language everyone can understand,” says DUGUUD’s CEO and serial entrepreneur David Scrivens.
DUGUUD, the trading name of Amberside Capital, is an FCA-regulated fund manager launched this month, with a focus on climate change, increasing biodiversity, improving public health, reducing inequality, and improving education. It was born out of a need to create a platform that allows the general public to invest in companies that make a genuine and positive difference to the world.
“It is difficult and costly to create a fund that’s open to the public, and it takes a lot of marketing spend to reach them,” says Scrivens. “Most fund managers get institutional investors, such as pension funds, to meet the minimum investment level required to launch a fund, but this route is often to the exclusion of the general public.”
The research also revealed a significant level of cynicism, with 58% of respondents of the opinion that most businesses claiming to be doing good are actually spending more time and money marketing their environmental and societal intentions than on taking tangible actions. Two-thirds (67%) also agreed that there are now so many businesses claiming to run their business in a way that is better for the environment and society that they find it difficult to trust the real impact of most of their claims.
“It is extremely difficult to prove environmental and social change, and comparing organizations is also tricky,” says Scrivens. “There is no easy solution to this without government intervention to create tools for measuring impact.”
However, he insists that DUGUUD will not allow the companies it invests in to focus on just the one area of good they may be doing, but will hold them to account for all aspects of their business. They will also show investors tangible examples of what companies are doing, for example, how the company has moved to greener energy, not just by paying an electricity supplier to certify that they are getting green energy when it just comes through the grid, but by building additional green energy generation.
The team has already invested in several projects, including £17 million in Sterling Suffolk, which produces tomatoes in what has been dubbed ‘Europe’s cleverest greenhouse’. The semi-closed hydroponic glasshouse is considered 25% more energy efficient than a traditional one and allows for greater carbon absorption, and potentially creates better-tasting crops.
Wildanet is a Cornwall-based fiber company aiming to bring much-needed high-speed internet to rural communities in the region to improve digital inclusion. DUGUUD has raised the company around £50 million to help them achieve this goal.
Other investments include Virti, which trains medical staff remotely using virtual reality, and which has been incredibly valuable during the pandemic, and Ateria Health, which has developed a way to improve gut bacteria in humans that could help with common issues such as irritable bowel syndrome.
Another key finding of the research was that 67% of adults who were asked about investing would expect independent financial advisors (IFAs) to understand this area and supply options as part of the funds they discuss with customers, while 59% would also expect any pension provider to consider these kinds of investments in how they manage, invest and report on the pension fund.
This highlights the role that IFAs and pension firms have to play in creating more clarity for their clients around investing for positive change. “We believe that all professionals should be helping to spread the word about investing to make an improvement for society, and we aim to work with as many of them as possible,” says Scrivens.
Looking ahead, the plan is to create a fund that draws on the investment team’s infrastructure experience to make larger environmental and social projects come to fruition, and to launch a science-based fund focused on investment in technologies that can make a huge difference to the planet or society, but preferably both.
Scrivens adds: “We are also considering whether to offer a small part of our own company for individuals to invest in so that people can join us on our journey to make a real positive difference and help more companies that do good get the investment they need.”