Climateinvest Podcast: Impact investing: matching investors with private companies

In this episode of the Prestige ClimateInvest podcast we speak with Alexandra Martinez, CEO and co-founder of Clota Varde. We focus on impact investing on this podcast and what this means within the larger debate on climate change and ESG investing.

Clota Varde was set up to help institutional capital to get mobilised and invested in impact strategies. The company works with asset owners across a range of issues related to impact investing and over the years has gleaned valuable insights into how asset owners think. The company was an early mover in terms of providing investment advice to institutions, using a strong ESG framework.

Impact investing is about the outcomes the investor wants, for example climate or social, as well as the risk-return profile the investor wants from a particular investment. There is increasing interest in impact strategies from a broad range of institutional investors, who are seeking a way to effectively achieve social outcomes.

Impact investing has traditionally involved early stage venture capital or seed money but there remains an inability among larger companies to structure themselves to become more appealing to institutional investors with impact strategies. How can companies make themselves more attractive in this area, when they have something viable to offer the investment community?

Clota Varde is very market-based in its approach: impact investment after all still has to make sense as part of an investment portfolio. This is very different from an ESG screening approach, where an investor is checking to make sure the companies in a portfolio are meeting defined criteria. Impact investing is about going beyond this and seeking to make a real difference with an investment.

Major environmental risks are not going away, and they are being taken more seriously by investors, but Martinez tells us how she feels not enough is being done yet. Institutional investors are becoming more active in this space, but the big question is how smaller investors can pool their assets to make more of an impact.

Impact and climate investing also involves very fast-moving changes in the way capital markets function and how risk is assessed. Impact investing is becoming more mainstream, Martinez says, and quickly.

Clota Varde serves both the buy side and the sell side in this respect and also advises on how clients can report in line with sustainable goals. According to Martinez, companies in a growth stage can benefit from impact capital, but they need to realise how to best engage with bigger investors.

We also discuss some of the big themes Clota Varde is seeing within impact investing and how new regulations are driving some of these. They include big investment topics like waste to energy and the better management of CO2 emissions. As we discuss on the podcast with Martinez, big changes will require a lot of money to be mobilised, and better communication with the stakeholders who need to be educated about the benefits.

Martinez also tells us about how the appetites and procedures of larger investors are changing, especially in the post-Covid environment. They are becoming much more aware of what an impact portfolio looks like.

To hear the podcast please click here.