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.

Positive impact from private debt

In the video below, Richard Sherry, Director of Alternative Credit, explains how institutional investors who employ a private debt impact investment strategy can achieve positive social or environmental impact and competitive financial returns.

• 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

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:

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.