The responsible investment sector should place more emphasis on the positive non-financial outcomes it has on portfolios, says TIAA Investments.
New York-based TIAA Investments head of responsible investment Amy O'Brien told InvestorDaily the industry must change the way it speaks to investors.
More work needs to be done to measure the outcomes of responsible investment practices, Ms O'Brien said, citing jobs creation and carbon reduction as two examples.
She pointed to a recent Cambridge University paper titled In search of Impact: Measuring the full value of capital as a first attempt to embed the UN's Sustainable Development Goals within responsible investment practices.
"The paper puts forward a way that companies could report about their impact on a portfolio," Ms O'Brien said.
Conversations with investors should always begin by explaining that responsible investment does not mean sacrificing returns, she said.
"You have to lead with that. I think if you go in strongly initially on the performance piece and then say in addition to being able to meet your financial objectives and goals you get these benefits – I think that will take things a long way," Ms O'Brien said.
But there also has to be clear communication about the outcomes for investors' portfolios, she said.
"Every year we survey the TIAA member base and we've seen a shift in their interest in this area," Ms O'Brien said.
"When we ask them what kind of strategies they'd like to see, there's much more support for investing in companies doing the right thing."
The responsible investment industry has been far too focused on 'exclusions' at the expense of 'outcomes', she added.
"I've spent a lot of time with advisers in the US and individual clients – if we got behind some of these outcomes – adoption would be a lot quicker," Ms O'Brien said.
"I think we're at a critical point now. We have to make sure the product and the fund vehicle makes sense for the end investors."