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March 25, 2022

How our Impact Committee helps us avoid Greenwashing

Every 3 months, external experts on our Impact Committee review our impact methodology and keep us up to speed with changes in sustainability. Here is an insight into what went on in the most recent meeting.

We want to let you know more about what goes on behind our impact assessments to give you a better idea of the work that goes into assessing the funds that you can choose on The Big Exchange. Every 3 months we have an Impact Committee meeting to review our methodology and here is an insight into what went on in our most recent meeting.

What is the Big Exchange Impact Committee?

The Impact Committee was set up to oversee our impact methodology which we use to assess all funds before listing them on The Big Exchange. It is led by Nigel Kershaw, Chair of our co-founder The Big Issue Group and a director of The Big Exchange, and brings together representatives from our asset manager partners, along with independent experts and advisors. Each committee member is an expert in the field of sustainable/impact investing or sustainability practice.  By putting the best people in the room, we are working to make sure that our impact methodology remains as robust and pioneering as possible.

The 3 top impact topics in the spotlight 

1.     Our impact methodology 

This is always top of the agenda as we constantly seek ways to improve it. In this meeting we discussed some changes made to the data requirements that all asset managers must sign up to before their funds can be assessed and rated. 

This included asking for more extensive impact data, such as net zero carbon targets and additional detail on carbon footprints. A decision was also made to get more information on how operational practices (how companies behave) are incorporated into stock selection. This is so company behaviour can be evaluated alongside the impact of the products and services from companies in which the fund invests. We want to ensure that the hurdles to obtain a medal remain demanding as industry standards advance.  

Our rigorous process means we scrutinise every stock in a portfolio for its contribution to the UN Sustainable Development Goals (SDGs). Funds are also scored on positive influence; engaging with companies as a force for change, and transparency; a rationale for the impact of each holding. We share this publicly and you can read the whole document here 

2.     Climate Solutions

The group discuss one thing each meeting that aims to spark a debate on how funds are investing for people and the planet. We know not all the funds take the same approach and we like to ensure that we are staying up to speed on new reports, research and methodologies to see how they could improve our impact assessments. This meeting we discussed a paper called Climate Investment Solutions (warning - a very long academic read!). This is a paper published by Harvard University which states that a subjective approach to impact investing is often needed i.e. you cannot just rely on data. The academics make a distinction between a formulaic approach (which means simply excluding companies with high carbon intensity) and an outcome approach (focusing on clear positive solutions). 

Their study found that relying on data alone may eliminate climate risks but does not necessarily capture the opportunities in the form of new technologies, products, and services. The professors have developed a methodology to identify companies providing solutions to de-carbonise the economy (batteries, electric vehicles, renewables, plant-based food etc).

Encouragingly, the study concluded that the potential opportunity is to find winners amongst solutions-based companies in the long run. It looked at stock performance associated with climate solutions from January 2011 to October 2021 and found evidence of outperformance that was particularly noticeable in the last four years of that period. 

3.     Knowledge sharing

The members of the committee proposed to put together “The Big Exchange Knowledge Academy” which would discuss and debate current issues in impact investing, including any controversies that may arise. The idea is that that participants will share insights and build a bank of content and articles (produced independently or by their firms) with the aim of sharing their knowledge, experience and insights more openly with the general public in language that is understandable. Our aim is to increase transparency, give people more access and to help everyone make better choices with their money. 

We strive to be different

Helping you make a positive impact with your money on the planet and its people is at the heart of what we do. We believe that what makes The Big Exchange unique is our focus on positive solutions. The medals awarded as a result differentiates us from other investment providers creating the trust you need to invest for good, with confidence. 

Finding the right investments can drive real change by supporting businesses that are working to create a more balanced, inclusive, and sustainable economy. Our methodology enables funds to account for the impact of their investments and it allows you to see which companies they are investing in (by showing you all their holdings).

Funds are reassessed annually to ensure they still meet our strict criteria, and we look out for anything that could have a negative effect on any stakeholder in the business (that includes employees, suppliers, and the community in which it operates as well as shareholders). 

Of course, we don’t claim to have all the answers as the impact space is evolving rapidly. Instead, we see impact investing as a transition towards a better world and that’s why we have this committee. We have pulled together experts from different firms to all push in the same direction behind The Big Exchange to try and improve the way we can all invest. 

Sources

1 Climate Investment Solutions - Serafeim 2022.pdf

Please remember that when investing, making money is not guaranteed and your capital is at risk. The value of your fund can go down as well as up. Tax treatment depends on an individual’s circumstances and may be subject to change. 

The Big Exchange (TBF) Limited is a wholly owned subsidiary of The Big Exchange Limited. The Big Exchange (TBF) Limited is an Appointed Representative of Resolution Compliance Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 574048). 

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