Wellington Management secured an award for its impact equity and bond reporting as well as its overall impact investment approach, which one IMPACT Awards judge described as a "well-considered and articulated" impact approach.
The $1.1 trillion investment management firm launched its first impact global equity strategy in 2015, with a fixed income strategy launched in 2018. As of 30 June 2023, the firm manages $3.9 billion in assets through its public market impact strategies and began developing a private market impact investing approach in 2021.
After formalising its impact measurement and management (IMM) team in 2021, Wellington has continued to evolve its impact reporting approach.
Its public market reporting includes a detailed explanation on what the impact rationale is for each underlying holding. A key performance indicator (KPI) is tracked throughout the life of each specific investment and is used to assess the intended environmental or social benefit. Historical comparison of KPIs is included to show impact progress over time and reporting also includes identification of a primary negative impact, and a qualitative evaluation of the overall impact (see Figure).
Wellington also produces regular case studies on its largest holdings, outlining impact performance in more detail, which can be found in the impact reports.
Figure: Wellington impact equity report representation – anonymised holdings
| Company | Theme | Impact Theory of Change | Core KPI | Metric Unit | Core KPI Data Point | 3 Year Annualised Change | Year of Initial Investment | Qualitative Assessment | Evaluation | Impact Risk | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2019 | ||||||||||
| Indian consumer finance company | Financial Inclusion | Investments in [the company] provide Indian drivers and small businesses with affordable finance on pre-owned commercial vehicles, which can allow them to accrue wealth and lead to broader economic growth. | Number of customers provided with access to financial services | Millions | 2.11 | 2.03 | 1% | 2017 | The small and medium sized businesses that the company serves are an important source of employment and growth in India. We have been impressed by the company's efforts to improve digital customer service and initiate programs to develop the skills of their drivers to promote entrepreneurship | Meets expectations | Emissions associated with use of the vehicles |
| Swiss electricity and gas utility meter manufacturer | Resource Efficiency | Investments in [the company]'s smart meters reduce water and gas leakage, improve metering accuracy and energy distribution efficiency by helping to identify loss in distribution systems, identify inaccurate energy connectivity, and utility theft. Ultimately, this will decrease the level of CO2 emissions globally. | GHG emissions avoided | Millions of metric tonnes | 8.6 | 7.3 | 6% | 2018 | We are satisfied with the strong growth in CO2 emission reductions over time enabled through a growing installed metering base. This supports our impact thesis that helping utilities to modernise their operations can have a tangible environmental impact. | Meets expectations | Environmental impact of operations and supply chain |
| UK pharmaceutical company | Health | Investments in [the company] support the development, production, and distribution of high-quality generic medicines. The affordability of these generic treatments, as compared to their branded counterparts, reduces healthcare costs and increases access, which can lead to better health outcomes for patients. | Healthcare cost savings from offering generic vs. branded treatments | USD millions | 4.76 | 5.09 | -2% | 2017 | The cost savings from [the company]'s generic offering have decreased slightly. Yet, we still believe they are playing an important role in expanding access to essential medicines, and their focus on improving the breadth of the generic portfolio through new product launches in 2023 is encouraging | Meets expectations | Product quality and price |
Over the last year, Wellington has significantly enhanced its existing IMM processes to improve the detail and accuracy of its data – including rationalising the number of KPIs to increase consistency and providing more detailed explanations of why KPIs are chosen to improve transparency.
"Transparency is of the utmost importance when it comes to impact reporting. We try to present a balanced account of the positive impact we've had through our portfolios, while also acknowledging impact risk and potential areas for improvement in outcomes and process" said Wellington IMM practice leader Oyin Oduya.
"We believe continual improvement in the collection and management of impact data allows us to analyse our impact more rigorously across asset classes, regions, and themes," Oduya added. "Better analysis also embeds feedback loops in our process, which we believe can further our objective of optimising real-world social and environmental impact."
In addition to the individualised KPIs to understand and monitor the impact of each investment, Wellington complements this with hands-on, in-person engagement with company boards and management.
Through the conception and evolution of Wellington's impact investing research in 2012, the firm developed its eleven impact themes (see Box), which were defined prior to but are broadly aligned with the widely used UN Sustainable Development Goals (SDGs).
Wellington's 11 Impact Themes
Wellington has developed 11 impact themes across three high-level impact topics:
Life essentials:
- Affordable housing
- Clean water & sanitation
- Health
- Sustainable agriculture & nutrition
Human Empowerment:
- Digital divide
- Education & job training
- Financial inclusion
- Safety & security
Environment:
- Alternative energy
- Resource efficiency
- Resource stewardship
