Rodney Schwartz: A funny thing happened at the conference in Monaco

An announcement from the Swedish government on pension funds and carbon footprints came as a surprise, writes our columnist

Rodney Schwartz reflects on the recent FundForum conference
Rodney Schwartz reflects on the recent FundForum conference

Every year, the global fund management industry converges on a conference called FundForum, which bills itself as "the world's largest fund management event". Unsurprisingly, fund managers from all over the world attend, as do suppliers and others seeking to service some of the world's professionally managed trillions.

This year's event in June was held, as previously, in embarrassingly opulent Monaco – which, for many reasons, did not seem the most inviting location for someone with social impact investments to peddle. Yet I had been asked to speak on a panel about investing ethically and for social impact. That such a session took place at such an event was most surprising, and I was particularly astounded that the was quite full – and, no, I had not paid people to attend.

This was followed by an even larger plenary session, featuring on the panel Nick O'Donohoe, chief executive of Big Society Capital. One audience member actually rose during the question-and-answer session to commend the organisers for raising such issues at the conference. Like me, this person felt that something extraordinary was taking place at this year's gathering.

As if to set the stage, on the first day of the conference the Swedish minister for financial markets announced that all pension funds in his country would be required to publish the carbon footprints of all the companies in their investment portfolios. The announcement came after the Obama administration decided to legislate to penalise the biggest polluters in the US, a move that knocked billions off the share valuations of energy stocks, especially of those companies with high-carbon and coal-based energy supplies.

For Swedish pension funds, the effect will be to bring forward the negative impact of high-carbon-footprint companies by instructing them to report now on vulnerable exposures rather than wait. I expect we will see more of this in the future as externalities are internalised and firms bear the social costs of their behaviour, to the detriment of investors.

It is in these areas that long-term investing and social investing meet; this is where the societal impact of what companies do has implications for mainstream investors. And in this spirit it was not all that surprising that longer-term investing or social investing entered the debate in Monaco and moved, marginally perhaps, up the agenda. For me, this is a critical development.

The amount of institutional money available for social investment has increased in the past few years – at ClearlySo, we estimate that it will increase from about £40m in 2012 to more than £1bn in 2015. But it will take considerable effort and time to deploy. For ambitious social entrepreneurs, it is simply moving too slowly. Our angel network, Clearly Social Angels, can meet some of this need, but its capacity is limited. Some of our larger clients require tens of millions of pounds to generate impact for their beneficiaries, and availability of such sums does not yet match the demand. This necessitates engagement with the mainstream and journeying to strange, hostile environments – such as Monaco.

Rodney Schwartz is chief executive of ClearlySo, which helps social entrepreneurs raise capital

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