📈Trading shares in the secondary market has little effect on the companies involved. While an investor may hold a portfolio of impactful companies, the relation between the investor and the investee companies is quite low.
In their Guidance for Pursuing Impact in Listed Equities, The Global Impact Investing Network see two ways in which listed equities investors may have impact.
🗳️First, through engagement: voting and engaging with the companies over time, to set expectations. Norges Bank Investment Management, for example, achieves this through expectation documents for companies and consistent voting practices, exercised over decades of investment and supported by a large minority ownership in a broad range of companies.
💰Second, through participating in IPOs and capital raises of listed companies. In the words of GIIN: “The most direct examples are investing in IPOs or participating in new rounds of capital raising. Investors can engage in the IPO process or provide anchor-style commitments to help the company build its IPO book and enhance market access”
🤝From our own experience at Amundsen Investment Management, being actively involved in IPOs and other Equity Capital Markets combines the best of the two avenues: impact through engagement with the company’s management and owners ahead of the transaction, and impact through providing fresh capital in the transaction itself.
🎙️ A topic we also discuss in the Innovations in Sustainable Finance podcast with Julian Kölbel: https://lnkd.in/eu8SSZAG