In order to measure the impact of financial investments, an exact combination of qualitative and quantitative key numbers is required. But the work begins beforehand, explains Nick Parsons, senior analyst at Thomas Lloyd, with the question: How and where do you invest in order to achieve the most sustainable development possible? The first focus is Asia.
By definition, an investment that has a positive effect must necessarily add new money to the economy. This is where real asset creation differs from commercial financial assets. The first provides new money, creates jobs, and builds infrastructure. In the latter case, only the ownership of the stock certificate is transferred, with no new money available for investment and without any impact on employment, economic growth or any significant social and environmental success.
“We firmly believe that the key to real impact lies in job creation,” says Nick Parsons, Head of Environmental, Social and Corporate Governance Research and Standards at ThomasLloyd Group. Work brings people not only income but also security, responsibility and dignity.
Infrastructure creates jobs
Infrastructure development requires both capital and labour. It requires high financial outlays, Parsons says, but also creates jobs and thus has an impact “well beyond the original project investments.”
With the goal of making a positive impact on the economy and society, ThomasLloyd expert emphasizes jobs in the “green” economy that are dedicated to generating sustainable and renewable energy in order to provide clean, locally produced electricity, for example.
“The availability of clean, reliable electricity is changing lives in the fastest growing countries in Asia, where our efforts to mitigate climate change must now be rapidly focused,” Parsons said.
Focus on Asia
The population of Asia will grow by 650 million people in the next 30 years. This is eight times what is currently living in Germany, or ten times the population of France. “This is why we have to take action to combat climate change in Asia,” the senior analyst demands.
Using the example of ThomasLloyd’s investments in biomass plants in the Philippines, where waste from harvesting sugar cane is incinerated, one can point out tangible and measurable effects:
– Increase farmers’ income by paying “money for waste”.
– Removing garbage from the fields and reducing the spread of rodents.
Improve soil quality through automated collection.
Better air quality as plant residues in the fields are avoided.
– Generation of locally produced “green” electricity.
Self-sufficiency and economic security by reducing dependence on imported fuel.
Parsons insists that one cannot often point out the fundamental difference between real and financial assets.
“Impact investing is not the same as ESG investing, which has become quite fashionable lately and has attracted significant net flows from investors. We believe ESG is just a set of behaviors that everyone engages in for a responsible person or any responsible company that should actually survive.”
Think outside the box
There may be increasingly sophisticated checklists to demonstrate compliance or compliance, but this is neither the catalyst for fundamental change nor the standard by which such change can be measured.
Instead, in order to achieve the greatest possible positive impact on the environment, climate and poverty, one has to think outside the box. It will unlock the best opportunities and the best benefits for everyone “when we invest where our money is making a difference for tens or hundreds of millions of people – through sustainable infrastructure investments in Asia to support there energy transition and make the world a better place to create a place,” Parsons emphasizes, that’s what we call impact.
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