Tim Crockford is head of equity impact solutions at Regnan, the responsible investment business affiliated with UK-headquartered J O Hambro Capital Management. Crockford leads a four-strong investment team, including Mohsin Ahmad, Maxine Wille and Maxime Le Floch. The team launched and ran the Hermes Impact Opportunities Fund until 2019, when they joined their current employer. They manage more than $250 mn across three funds, which launched in October 2020.
Tell me about the Regnan Global Equity Impact Solutions Fund you run
The fund is a global equities strategy that looks for businesses driving a positive environmental or social impact, as defined by the UN Sustainable Development Goals (SDGs) and their underlying targets.
The team and I championed this approach previously when we launched a similar fund with our old employer. Our current fund looks for companies with a product or service at the center of their mission to solve a major environmental or social challenge, and we then look to engage with all our investee companies to drive additional positive impacts by encouraging better business practices.
What is an impact investment?
What impact investors are trying to do is find new, more sustainable ways of doing things, of generating productive growth, and then allocate capital toward companies that are capable of solving major environmental and social challenges. Impact investors also invest with the intention of driving their own positive impact, which we aim to do by working collaboratively with the management teams we back.
For example, we look for companies that are able to offer a circular economy solution to replace what is otherwise a linear, extract-use-discard model. One of our investments is in a business that recycles spent steel dust generated in the steel manufacturing process. It takes waste material and, rather than allowing this highly toxic material to go into landfill, recycles it through a patented refinery process into zinc oxide, which is then refined into zinc.
So the business is selling a commodity, but it’s not extracting the commodity from a primary source; it’s recycling a secondary source.
How do you find assets to invest in?
The process is built on our sustainability taxonomy, which relates to the UN’s SDGs, which is how we define what a positive impact is. The businesses we invest in must contribute to one or more of the UN’s 17 goals and – specifically – one or more of the 169 targets that underlie them. These span things such as broadening access to education, the transition toward a zero-emissions economy and green power generation, health and wellbeing, with future therapy modalities that lead to better treatment rates and financial inclusion, among many other goals.
We started building the taxonomy in 2016, a year after the SDGs were released. We needed to study the SDGs and understand the opportunity for globally listed entities to contribute toward these goals. This led to us digging deeper than the goals, looking into the targets that underlie them and trying to match products and services with those targets. We articulate a theory of change about how each particular product or service might drive a better outcome against one of the targets, to represent a solution.
This process helps us to decide how to direct our research resources and prioritize which products and services to invest in, looking at their scope for scale. At the same time, we keep in mind the underlying philosophy that impact investing is about delivering an additional measurable impact, so our investments must have a quantifiable impact that can be delivered from investment through to divestment.
The first thing we look at is the extent to which we expect the market for these solutions to grow and solve otherwise unmet environmental social needs Then they go through a much longer investment process, in order to validate that the expected positive impact is indeed being generated and to assess the company’s valuation.
Ultimately, the taxonomy gives us our investment universe so we’re not using a benchmark or buying an off-the-shelf investment universe. Over the last five years, we’ve built up a list of more than 2,200 companies worldwide.
This is an extract of an article that was published in the Summer 2021 issue of IR Magazine. Click here to read the full article.