Impact Examples

Sustainable: ESG Evaluation

Sonen’s Sustainable investments are evaluated through a wide variety of ESG impact indicators that can communicate on an investor’s related risks, opportunities and impact creation.

Thematic: Impact Investing Frameworks

Thematic investing seeks investment opportunities directly related to social or environmental needs, and often addresses both dimensions simultaneously. Sonen uses proprietary “impact frameworks” for various impact themes that identify specific social or environmental challenges and that identify outcomes that over time, are most desired to meaningfully address those outcomes. These frameworks then specify a series of investment strategies that contribute to achieving these outcomes.

Sonen invests in the following Thematic areas (frameworks for some of these themes can be found in Resources). 

  • Financial Services
  • Education
  • Housing/Community Development
  • Healthcare
  • Sustainable Timber
  • Land and Water Resources
  • Environmental Infrastructure
  • Waste Management
  • Micro-, Small- and Medium-Sized Enterprises

The following four frameworks have been summarized as an example of how we think about these themes:

 

Energy

The Energy Challenge

Energy production is the source of 66% of global greenhouse gas (GHG) emissions.1 Reducing these emissions and meaningfully addressing climate change depends on widespread adoption, by industry and consumers, of low-carbon alternatives to fossil fuels.

The Case for Impact

  • Increased energy efficiency has now saved more energy than the output from any other single fuel source. Efficiency gains could reduce energy demand by 50% by 2035.2
  • The energy poor, or those without reliable, affordable energy, suffer from multiple social and economic disadvantages. Four million people/year die prematurely due to indoor air pollution from biomass combustion.3

Intended Impact Outcomes

  • Reduced GHG and toxic emissions.
  • Increased energy equity through expanded supply of renewable, affordable energy.

Fixed Income Investment Example

Financing centralized and distributed energy infrastructure in regions where availability varies or power sources are “dirty”.

Public Equity Investment Example

Technologies across industries that increase energy efficiency; consumer-level technology that reduces energy consumption.

Sources: 

  1. Better Growth, Better Climate: The New Climate Economy Report, Energy. New Climate Economy. 2015.
  2. Nahal, Sarbjit and Beijia Ma. The Efficient Frontier – Energy Efficiency Primer. Bank of America Merrill Lynch, Thematic Investing. September 2014.
  3. “Household Air Pollution and Health.” World Health Organization. March 2014.

 

 

Water

The Water Challenge

Human water consumption has increased at twice the rate of human population over the last 100 years, and global population is expected to increase by 3 billion by 2050.1 Existing water resources are stressed, depleted or severely compromised in their ability to continue providing for humans’ and natural ecosystems’ most basic needs.

The Case for Impact

  • Utilities lose 40% of clean water due to leaks globally.2
  • Global water infrastructure requires $22T for repair and expansion by 2030.3
  • Watershed protection and ecosystem restoration costs a fraction of human-made infrastructure for water quality restoration and nutrient cycling.4

Intended Impact Outcomes

  • Increased water efficiency and re-use.
  • Improved water access and distribution.
  • Strengthen ecosystems’ natural ability to enhance land and water resources.

Fixed Income Investment Example

  • Bonds for modernizing infrastructure.
  • Bonds focusing on expanding reach of services to disadvantaged populations.
  • Supranational bonds providing resources for climate change adaptation and mitigation.

Public Equity Investment Example

  • Technology solutions designed to increase water efficiency in agriculture and industrial applications.
  • Water utilities in fast-growing urban areas globally.
  • Water infrastructure services with a focus on water efficiency and water quality.

Private Equity Investment Example

  • Sustainable agriculture and horticulture, including organic production, drip irrigation and land restoration.
  • Service providers and enterprises that are expanding access through private market mechanisms, in rural, peri-urban or urban communities globally.
  • Development of mitigation banks; water rights.

SOURCES

  1. Hinrichsen, Don, and Henrylito Tacio. The Coming Freshwater Crisis is Already Here. Wilson Center. 2002.
  2. Sensus Water 20/20. Sensus. 2012.
  3. Doshi, Viren, Gary Schulman, and Daniel Gabaldon. Lights! Water! Motion! Booz Allen Hamilton. 2007.
  4. The Economic Benefits of Protecting Healthy Watersheds. United States Environmental Protection Agency. 2012. doi: EPA 841-N-12-004
 

Green Real Estate

Real Estate Challenge

Globally, the built environment emits 33% of all GHGs, and accounts for 40% of all energy use.1 Worldwide, more than 330 million urban households live in substandard housing or are financially stretched by housing costs.2

The Case for Impact

Real Estate investing can simultaneously address both social and environmental challenges. The built environment has the most potential for delivering significant and cost-effective GHG emissions reductions.1 Environmentally minded construction can help mitigate climate change and increase social equity through providing affordable, accessible housing to the world’s growing low- and middle-income populations.

Intended Impact Outcomes

  • Enhance the built environment’s sustainability performance, specifically GHG emissions, materials use and waste.
  • Increase social equity and accessibility in the built environment.

Fixed Income Investment Example

Bonds for energy efficiency retrofits.

Public Equity Investment Example

Technologies or innovations that reduce demand for raw materials and energy consumption within buildings.

Private Equity Investment Example

Sustainably-built workforce housing in global geographies where demand greatly exceeds supply.

Sources:

  1. Buildings and Climate Change. United Nations Environment Programme. Sustainable Buildings and Climate Initiative. 2009.
  2. Woetzel, Jonathan, Ram Sangeeth, Jan Mischke, Nicklas Garemo, and Shirish Sankhe. A Blueprint for Addressing the Global Affordable Housing Challenge. McKinsey Global Institute. McKinsey & Company. 2014.
 

Sustainable Agriculture

The Agriculture Challenge

Without specific investment to support global sustainable agriculture, increased food insecurity and further environmental deterioration related to water scarcity and climate change are inevitable.1

The Case for Impact

  • Excessive fertilizer application is a major source of pollution for freshwater and coastal ecosystems.2
  • Irrigation accounts for 70% of overall freshwater withdrawals and is often wasteful and inefficient.3, 4
  • 30-50% of global food supply is wasted across the supply chain.5

Sonen's Goals for Agriculture Investing

Target key agriculture themes that improve global food security, meet global nutritional needs and improve environmental sustainability, including:

  • Improved nutrient management,
  • Reduced water use intensity, and
  • Reduced food waste.

Fixed Income Investment Example

Financing for organic or sustainably-oriented food production; and preservation of the use of agricultural land.

Public Equity Investment Example

Technologies for precision agriculture and increased water-efficiency.

Private Equity Investment Example

Infrastructure for efficient production, storage and distribution of food resources; preservation of use of agricultural land.

Sources:

  1. West, Paul C., James S. Gerber, Peder M. Engstrom, Nathaniel D. Mueller, Kate A. Brauman, Kimberly M. Carlson, Emily S. Cassidy, et al. Leverage Points for Improving Global Food Security and the Environment. BioScience. March 2015.
  2. Ongley, Edwin D. Control of Water Pollution from Agriculture, Chapter 1. Food and Agriculture Organization of the United States (FAO). Natural Resources Management and Environment Department. 1996.
  3. FAO. 2050: A Third More Mouths to Feed. 2009.
  4. Wenzlau. Sophie. To Combat Scarcity, Increase Water-Use Efficiency in Agriculture. WorldWatch WorldWatch Institute. 2013.