The war in Ukraine has laid bare faultlines in ESG orthodoxy: is nuclear power a solution to energy security? Is there an ethical case to invest in arms? Judgements on such issues will vary from person to person, but asset managers often find each territory has a different view, too. Even beyond the conflict, ESG managers do not agree on whether holding oil companies is inconsistent with a transition to net-zero emissions, or if these firms still have a vital part to play.

Wellington’s managing director of impact investment, Louise Kooy-Henckel (pictured), leads the firm’s sustainability efforts in Europe, the Middle East and Africa. She told Citywire Amplify why exclusions make it hard to scale investments and offered alternative approaches.

In this Q&A you will learn:

• How Wellington measures its impact goals.
• Kooy-Hencke’s role working with clients.
• Why she thinks exclusions are the wrong approach.
• The biggest challenge for those in ESG investing careers.

What is the aim of the managing director of impact investment at Wellington?

I have a super-exciting role. I bridge our sustainability investment platform and work in very close partnership with our global director of sustainable investment practice [Wendy Cromwell]. It’s all about setting the research agenda and the strategy for the firm’s sustainable investment practice.

My focus is across all the different asset classes. It covers ESG research and integration, impact investing, climate and also long-term engagement strategies. My specific focus is on helping drive the firm’s sustainability initiatives in Europe and partner with our clients there, and on how they implement their sustainable investment programmes.

A client might come to us and say: ‘I want to do something within sustainable investment but I’m not sure where to start. I don’t know what questions I should be asking.’

What are they trying to achieve? What are the motivations? What are the objectives? My job is to get them to the right place in terms of the investment platform Wellington can offer.

The other side is dedicated to impact investing specifically. There I work with the investment team. I have responsibility for the integrity of the investment approach and some oversight of portfolio positioning, performance and risk exposures, and I also represent the investment team out in the field, talking to clients, prospects, consultants, and so on.

How do you work with other teams?

I work in partnership with all of the teams internally and sometimes it could be education-focused – to help those specific teams understand a part of sustainability better. At other times it would be representing their approach out in the field with a client, for example.

How do you manage the impact you achieve?

We have quite a high bar for impact materiality, which is a revenue alignment. Secondly, we look at whether a company’s or issuer’s solutions are additional and unique to what’s already offered in the market and whether they are meeting an underserved demographic or an unmet need.

A third point is whether we can measure the impact. We apply a measurement framework to every investment we do in the impact franchise. We use what’s called a logic chain, which looks at different measures of impact, starting with an input – how much a company dedicates in terms of its investment to building an impact product or service, for example.

Then we look at what activities that drives. That could be a revenue number, but it could also be the number of students educated. We look at the outputs.

The ultimate, fifth measure is the contribution to an overall problem we are trying to solve.

Is there one specific impact example that became a success story?

Where we have found investment opportunities in companies that we would consider a new innovator, perhaps with technology or a new service model. For example, to reach populations in rural areas of a country, to deliver healthcare in a way that hasn’t been done before. Investments like that have grown to become much bigger companies over the years.

Take telemedicine. I remember we did something very early on in 2015 in the portfolio, today it is a given.

How did you first become interested in sustainability?

I worked on a portfolio that was a socially responsible investment portfolio, focused on exclusions. It took lots of things out of the investment opportunity: tobacco, alcohol, gambling. It was difficult within a European remit to get scale. One part of Europe thinks nuclear power is perfectly acceptable; another part does not. It was difficult to find common ground, and I learned that exclusions do not unite people or capital.

If you turn it on its head and focus on the positive solution you can provide by impact investing, you can unite people and you can unite capital. Impact investing is a good way of driving solutions for big problems in the world, because it’s driving change, but it’s also delivering a financial return. It’s going to be an important tool for reaching the UN’s Sustainable Development Goals.

What advice would you give to someone starting a career in impact investing?

Have an open mind and learn everything you can about the different types of impact investing. Be mindful of the frequent questions that come up and see the other side.

There are plenty of discussions in the market around the negative impact of investments and around greenwashing. It is important to understand these issues from all sides.

It is a very exciting place to be. It’s also a place that’s moving fast, so staying up to date is key, and that’s pretty hard.