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Audience

Impact investing

Institutional asset owners are bringing the scale needed to tackle global challenges from climate change and pollution, to better healthcare and education. But more can be done.

Impact investing offers a way to do this and generate the financial returns required over the long term. Impact investing is investment made in companies, projects or organisations that intentionally seek a measurable social or environmental benefit alongside a financial return.

The value of investments will fluctuate, which will cause prices to fall as well as rise and investors may not get back the original amount they invested.

Our approach to impact investing

The primary way we approach impact investing on behalf of our clients is through private debt – that is, through privately-negotiated transactions rather than publically-traded bonds.

Private debt investments that generate clear environmental or social impact can be across a range of maturities and different asset types. For example, this could be a private loan to fund the construction of a solar park or wind farm, or new affordable housing, hospitals or university facilities.

Using private debt for impact investing can help pension funds, insurance companies and other institutional investors meet their long-term goals.

For more information on M&G's approach to responsible investment, please visit our corporate site.

Why private debt for impact investing?

  • More ‘pure-play’ impact investment opportunities than public markets
  • Ability to directly negotiate covenants and other investor protections
  • Potential for attractive returns given relative illiquidity and complexity
  • Close dialogue with borrowers that could help:

- ensure the investment delivers a positive impact and preserves capital

- foster engagement to address ESG issues, improve impact reporting and mitigate risks

A diverse range of investment opportunities

A-diverse-range-of-opportunities

Intent, measurability and flexibility

In our view, to be meaningful for investors and to address many of the environmental and social challenges we face, an effective impact investment strategy should target three objectives:

three-objectives

Investing in sustainable private assets requires detailed knowledge of environmental and social standards, as well as skill and experience in asset sourcing and creation.

We aim to source impact assets across a wide opportunity set to ensure the best possible value for our clients. This not only helps to maximise returns but also creates scope to diversify portfolios.

Impact investing in action

As an asset manager we naturally allocate long-term capital to responsibly-managed businesses and have been financing impact investments in private debt since the 1930s.

Find out more about some of the impact investments we have made to date in the case studies below.

For source information, please refer to the full case studies.

Urban regeneration project

 

Expected
social impact

Estimated 14,500 new
jobs generated

  • £115 million in funding provided by M&G as part of a 10-year private placement deal
  • Expected return premium: 1% to 2% p.a. over equivalent-rated public bonds
  • Key M&G impact themes and expected metrics:

Economic inclusion – estimated 14,500 new jobs to be generated

Social housing – approx. 4,000 new social homes to be built

Green buildings – most of the commercial space built to ‘BREEAM Excellent’ certification

This investment aligns with the following UN Sustainable Development Goals (SDGs):

Graphic-8_Decent-word-and-economic-growth Graphic-2011_Sustainable-cities-and-communities Graphic-2013_Climate-action

Read the full case study

 

US residential solar

 

Expected
environmental impact

50,000 tCO2e
emissions avoided
per year

  • M&G participated in the financing of a pool of US residential solar loans
  • Expected return premium: 0.5% to 1% p.a. over equivalent-rated public corporate bonds
  • Key M&G impact theme and expected metrics:

Renewable energy generation – 50,000 tCO2e emissions avoided per year

• Approximately 101,000 MWh of clean energy generated per year

This investment aligns with the following UN Sustainable Development Goals (SDGs):

Graphic-7_Affordable-and-clean-energy
Graphic-2013_Climate-action

Read the full case study

Social housing finance

 

Expected
social impact

1,000 new social
or affordable
homes

  • £85 million, 25-year loan provided by M&G
  • Expected return premium: 0.5% to 1% p.a. over equivalent-rated public bonds
  • Key M&G impact theme and expected metric:

Social housing – more than 1,000 new social or affordable homes

• Approximately 65% of renters on state welfare assistance

• Almost 40,000 on local authority waiting lists

This investment aligns with the following UN Sustainable Development Goals (SDGs):

Graphic-8_Decent-word-and-economic-growth
Graphic-2011_Sustainable-cities-and-communities

Read the full case study

 

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