Lisa Ashford, Chief executive officer, Ethex
Please give us a bit of background on yourself, and how your organisation plays a leadership role in the impact investing space.
Over the past 20 years I have been involved with a number of organisations that have been pioneers in both the clean energy and environmental markets. In 2013, I took the position as CEO of Ethex determined to prove that the idea of investing money that aligns with a person’s social and environmental values could become the norm rather than the exception.
Over the past four years, Ethex has been working on building a market in the UK for impact investing or as we prefer to call it positive investing. During this time, we’ve helped to raise over £54 million of investment from 11,000 retail investors - providing more than 55 social enterprises, community organisations and charities with the necessary finance to develop and grow.
Ethex’s focus is to bring together on one platform the best positive savings and investment opportunities to make it easy to make money do good. Through Ethex people can invest and save with businesses they believe in – whether it’s renewable energy, fair trade, social housing, organic farming, green transport, or micro-finance schemes whilst generating a financial return.
Our mission is clear – we want to continue to grow the positive investment market so that everyone can invest and save in a way that brings benefit to society and finances a more sustainable world.
How well are companies adapting to the mainstreaming of purpose-driven finance? What ways is impact investing making headway, and where is it lagging?
It is fantastic to see that impact investing has continued to grow year on year and an activity once seen as niche is definitely growing in popularity. The finance sector continues to innovate, developing new solutions to tackle key issues such as climate change, social housing and sustainable food production and hopefully in the not too distant future, impact investing will move into the mainstream.
Despite this growth in popularity, systemic issues across the finance sector as a whole have meant that more often than not many of the larger financial institutions can often be guilty of paying lip service to the broader issues of sustainability and responsible investing. Examples of this include the recent Greenpeace campaign that highlighted how HSBC with seemingly comprehensive sustainability policies in place were still found to have been part of a banking syndicate that made loans of US$16.3 billion to six companies whose palm oil operations have destroyed vast areas of rainforest, peat-land and orangutan habitat in Indonesia.
Increasingly at Ethex we are seeing the public becoming much savvier about how and where they invest their money – demanding more ownership and transparency from financial providers. What’s clear from our latest research study – Positive Investor 2017 is that retail investors are often omitted from the impact investing conversation – which is a real shame given 19.5 million people in the UK are already interested or involved in positive investing in some way.
What challenges do you see for the future of purpose-driven finance?
The critical challenge now for purpose-driven finance is scalability. Scaling both in terms of the amount of finance flowing into positive investments and also significantly growing the type and number of positive investment opportunities that are investment ready.
According to the UN, $3.9 trillion in investment in the Sustainable Development Goals is needed each year, yet current levels amount to only $1.4 trillion – a sizeable funding gap of which retail impact investors could play a critical role in filling.
In addition, the development of robust measurement criteria will be key in clearly showing that the social or environmental impact from any purpose driven-finance is truly being realised. This will be fundamental in ensuring that risks with regards to accusations of greenwashing are successfully mitigated.
How has impact and ESG-oriented investing evolved in recent years?
ESG oriented investing has been a well used turn of phrase over the past few years. A pure ESG approach to investing - which is largely based on removing negative investments or minimising social, environmental and governance risks - quite simply doesn’t go far enough currently. People are increasingly demanding the opportunity to invest their money with businesses, organisations and charities that have a much more positive impact on society. If they can’t access these opportunities through their existing finance provider then they often look to invest directly.
This view is supported in our recent research findings. What is particularly frustrating however, is that of the 19.5 million people in the UK who are interested in positive investing, half of these people don’t feel they know enough about the opportunities available to them. The traditional finance sector is categorically failing to tap into this unmet demand through the inadequate provision of accessible products such as ethical current accounts, ISAs and pensions. These are a key part of the solution in moving positive investing into the mainstream.
What will you be discussing at The Economist's Impact Investing event in London on June 15th?
My main focus will be to look at how investors have the power to create significant positive change in the world. Making positive choices as to what you do with your money is an extremely powerful force. However, many people lack the understanding that by doing nothing they are inadvertently funding activities that may not sit well with their moral compass. Banks are starting to offer products that go some way to tackling these issues, but for certain people this just doesn’t go far enough. These retail investors often don’t feel they have the financial knowledge to make more than the most basic of financial decisions and there is an urgent need to educate and enable people to make more informed decisions.
Only if consumer demand is strong enough at the grass roots level will financial institutions be forced to go beyond their green rhetoric and embrace impact investing as more of a mainstream activity. Together investors and financial institutions can help to tackle catastrophic climate change alongside other global development issues but it is likely that the sector will have to look completely different to how it looks currently.