Leading investment organizations develop a framework to link impact to value creation
ARLINGTON, Va., Oct. 06, 2020 (GLOBE NEWSWIRE) -- Research by Willis Towers Watson’s Thinking Ahead Institute warns institutional investors that they risk a disconnect between ambition and reality if they focus on measuring investment impact without explicitly linking it to value creation for stakeholders.
In a research report from its sustainability impact working group* — titled Sustainability: understanding impact and value creation — the Institute warns that investment organizations need to be wary of the gap between their positive intentions for a more sustainable economy and their ability to deliver it.
“Most investors tend to focus on the measurement of their impact but stop short when translating this into an evidence-based narrative that clearly explains how these sustainability metrics translate into value and outcomes for each stakeholder. Critically this should also include future expectations that can inform investors’ deployment and stewardship of capital,” said Marisa Hall, co-head of the Thinking Ahead Institute.
To help bridge this gap, the working group devised a scorecard to monitor value-creation activities across a range of stakeholder groups and a four-step self-assessment framework to identify areas of desired improvement:
Identify who the key stakeholders are and understand their expectations and needs to determine what is valued.
Align organizational purpose with the desired outcomes by understanding which stakeholders the organization prioritizes.
Identify gaps between current practice and desired norms that align with the organization’s beliefs and value systems, evaluating these systematically through tools such as questionnaires and scoring systems.
Openly discuss the results and gaps to develop an internal action plan.
As a fifth step, the working group recommends that the output of this impact and value-creation assessment should be communicated externally.
“Historically, articulation by the investment industry of value creation linked to purpose and impact has been poor. But this is changing as stakeholders increasingly expect authentic, intentional and transparent communication of the value they can expect now and prospectively. While challenging, we believe this can be achieved by using the integrated reporting framework or, in practice, producing an integrated report,” said Hall.
“Investment has long been seen as a two-dimensional problem of optimizing risk and return. In reality it’s always been three-dimensional: Investment also impacts the world around us. We believe managing impact improves risk and return outcomes; therefore, using this framework will help investment organizations address all three together and effectively communicate their overall value added.”
*The sustainability impact working group comprises representatives from AXA Investment Managers, Coronation Fund Managers, Dimensional Fund Advisors, the International business of Federated Hermes, First State Super, QIC and Willis Towers Watson.
About the Thinking Ahead Institute
The Thinking Ahead Institute was established in January 2015 and is a global not-for-profit investment research and innovation member group made up of engaged institutional asset owners and service providers committed to mobilizing capital for a sustainable future. It has 45 members around the world and is an outgrowth of the Thinking Ahead Group, which was set up in 2002. Learn more at www.thinkingaheadinstitute.org.
About Willis Towers Watson
Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 45,000 employees serving more than 140 countries and markets. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.
Ed Emerman: +1 609 240 2766