Explaining the measurability of positive impact, Halpin contrasted the companies in the magnificent seven with Intuitive Surgical. Where those companies have such a wide range of products and services that can be used for almost any purpose, Intuitive Surgical develops robotics that assist in surgeries. It’s the market leader for robotic assisted surgery and the delivery of its units to hospitals can be directly tied to better surgical outcomes and more efficient healthcare service. The positive impact of a company like Intuitive Surgical is immediately measurable and far less open to debate than an Nvidia or Meta might be.
Halpin accepts that by avoiding the magnificent seven over the past few years, her fund has missed out on some returns. She emphasizes, though, that at a certain period returns were so narrow that almost any equity investor was punished for being in anything other than Nvidia. However, she emphasizes the time horizon view that Martin Currie takes. Both stock value and positive impact can take a long time to play out. She believes, however, that a longer-term approach that integrates positive impact in a dual mandate on par with investment returns can drive value.
Positive societal impact is an inherently subjective ideal. We need only look at our own politics to see how widely different ideas of positive impact diverge. The Improving Societies Fund chooses three criteria that Halpin believes most investors would agree on as positive change: improving wellbeing, improving inclusion, and supporting a just transition. The idea of investing in companies that help people be healthy, actualize economically, and face big changes allow for a broadly agreed upon sense of positive impact, without forcing the fund to become thematic. Halpin notes that the portfolio is certainly not debate-free and that she welcomes asset managers sharing their views on the impact any one particular company can have.
Halpin is aware, too, that when looking at an innovative company there are chances their innovations may have less of a positive impact than intended. They may even have a negative social impact. Halpin treats that as a form of risk, one that she and her team mitigate by assessing governance and sustainability factors as well as any externalities or internal dynamics that could cause conflicts in the future. She argues that assessing the risks of these more negative uses can also help protect investors on the bottom line as a potential major negative development could hurt a company’s financial performance.
For advisors whose clients want to pursue ESG strategies, Halpin believes there may be a case for assessing impact funds. Not just from an idea of creating more social good, she believes impact can be a useful assessment tool that helps investors identify innovative leaders and potential returns drivers in the long-term.
