Impact investing outshines traditional portfolios: Insights from PEI’s summit


During a recent panel at the PEI’s Impact Investor Summit North America, a remarkable trend was observed: portfolios with an impact investing theme are now outperforming traditional portfolios.

Position Green recently took the opportunity to outline some of the key moments from PEI’s Impact Investor Summit North America.

This shift is noteworthy as it highlights that impactful investments can yield significant returns without compromising on their societal or environmental goals. Contrary to common perceptions, impact investing does not necessitate a trade-off in financial returns.

An important development in the sector is the increasing application of the Sustainable Finance Disclosure Regulation (SFDR), particularly its intensive Article 9. This regulation has enhanced transparency and consistency in sustainability reporting, greatly benefiting investors. It offers clarity in understanding the risks and opportunities of sustainable investments, thereby aiding in informed capital allocation decisions.

Comparatively, the SEC in the United States has taken a different approach. While the SFDR is aimed at promoting sustainable innovation, the SEC’s focus is predominantly on investor protection. This distinction, albeit subtle, indicates a divergent viewpoint on the role of sustainability in financial regulation.

In Europe, the SFDR has faced its share of challenges. The European Commission is actively working to address the concerns raised, primarily focusing on simplifying disclosure requirements, introducing flexibility in their application, and delaying the implementation of these requirements to accommodate these changes.

Mirroring these efforts, the UK has introduced its own Sustainable Disclosure Requirements (SDR), targeting similar goals to the SFDR, including combatting greenwashing. The finalized rules and guidance for the UK’s SDR, however, have been delayed due to extensive feedback and are anticipated to be released by the end of 2023.

In the United States, California has taken a significant step with the passage of the Senate Bill 253, the Climate Corporate Data Accountability Act. This Act mandates large corporations in the state to disclose their greenhouse gas emissions publicly. Additionally, Senate Bill 261, which is expected to impact a wider range of firms, requires entities to disclose climate-related financial risks and opportunities in alignment with the Taskforce for Climate-Related Financial Disclosures (TCFD).

A central theme emerging from these diverse financial disclosure directives is the need for international alignment. This alignment is crucial to ensure that regulations are not vastly different across countries. As we move into 2024, substantial evolution in this field is anticipated.

Perhaps the most intriguing takeaway from the conference was the realization that increased focus and requirements on sustainability reporting might lead to a loss of overarching perspective, or “losing the forest for the trees.” Contrary to this belief, the growing consolidation and application of sustainability reporting have actually enhanced impact. It empowers investors and stakeholders with crucial information, enabling them to make more informed decisions about where to deploy capital and resources. This sentiment resonated as the conference concluded, reflecting a collective anticipation for further progress in sustainable business practices in 2024.

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