Aaron Pinnock, Church Commissioners for England

Aaron Pinnock is an impact investment analyst at The Church Commissioners for England. He leads impact investments for the £8.7 billion ($12.3 billion; €10.1 billion) endowment fund of the Church of England. New Private Markets caught up with Pinnock, a speaker at May’s Impact Investor Forum, to get briefed on the endowment’s attitude to impact and ESG and what it needs to see from prospective GPs.

How does impact fit in the wider portfolio?

We see impact as an evolution or continuation of our responsible investment approach. It is a tool we use to look across the entire portfolio and represents a step forward on the ‘do no harm’ to ‘do good’ journey that we are currently on with our investment portfolio. It is across all asset classes, but in terms of making new impact investments, we are looking predominantly at private markets.

And how far is the fund on the journey to “do good”? Is every new investment now looked at through an impact lens?

We benchmark our portfolio every year in terms of alignment to our own internal impact themes. We want to see that alignment increase every year. Is every new investment made with an impact focus? The market isn’t big enough for that yet. We have responsible investment minimum standards; we don’t have impact minimum standards yet.

What are the priority impact themes?

As a faith-based organisation, we looked at the missional objectives of the institution of the church and mapped those out to investable themes. They ended up aligning quite nicely with the UN Sustainable Development Goals. There are areas where there is a better investment case. Now we have a net zero target, anything with a climate lens is powerful. On the social side, healthcare is another sector that has historically had a strong investment case.

When it comes to private markets, how does the fund invest?

All our private markets investments are through funds, but we will do co-investments with our GPs. We work with quite a few GPs that identify themselves as being impact managers. We also work with quite a few that we count as impactful, but don’t call themselves impact; you could describe what they do as “investing in solutions”. Examples would be those that invest in renewable energy or some investors in healthcare and biotech.

What do you look for in a manager?

Any investment we make – impact or otherwise – has to meet our financial returns. From a responsible investing/impact perspective, we want to see how their approach to RI and ESG is unique to their firm. We don’t want to see an ‘off the shelf’ policy or impact approach or just a rainbow of SDGs on a screen. That is meaningless. We want to see targeted outcomes or how responsible investment or impact is embedded in their process.

Governance in responsible investment is so important. We want to see a clear governance structure: whether there is an ESG or impact committee that actually meets and is led by someone senior in the firm.

A clear process across the lifecycle of the investments; integration, active ownership and then exit. Quite often the firms doing minimum standards of ESG or impact look only at integration at the point of investment, rather than ongoing active ownership and then exit.

Reporting and assurance against a baseline… if that can be externally assured, then all the better.

Diversity is important for us. We are currently awaiting investment committee sign off to include minimum diversity standards to be applied to all managers we work with. We need to see diversity of thought in an investment team.

Do you measure impact against any particular frameworks?

We look at alignment to our themes on a revenues basis: what revenues is a company producing to certain impact themes. We are working to develop this to focus on outputs and outcomes rather than alignment, but it is difficult as an LP with a multi-asset portfolio.

We use the Impact Management Project’s five dimensions of impact, because it is emerging as – not quite a standard – but a good approach and certainly one that many of our managers have taken.

We are part of the Impact Frontiers group of the IMP, a cohort of LPs and GPs that are looking to bring the impact process into the investment process a bit more.

In terms of frameworks, we have our own internal one based on industry norms. Now that the EU Taxonomy is coming into force, we will look to align with that. When the social taxonomy emerges, we will do something similar.

What exciting new developments in the impact space are you seeing?

For me, a lot of our GPs that are good when it comes to responsible investment, but aren’t necessarily investing in solutions, are now evolving their processes to include elements of impact. Through active ownership or stewardship of companies, they are trying to move the dial in terms of the impact those companies are having.

It’s somewhere in between responsible investment and impact. Quite a few of our GPs are developing in this way, and I think this is the way to move the impact agenda forward. That’s the most exciting thing in my opinion.