Institutional investors risk a disconnect between ambition and reality by focusing on measuring investment impact without explicitly linking it to value creation, according to a research report from Willis Towers Watson's Thinking Ahead Institute released Tuesday.
The report from a sustainability impact working group, "Sustainability: understanding impact and value creation," warns that asset owners and managers need to close the gap between wanting a more sustainable economy and their ability to deliver it.
"Most investors tend to focus on the measurement of their impact but stop short when translating this into an evidence-based narrative that clearly explains how these sustainability metrics translate into value and outcomes for each stakeholder," said Marisa Hall, co-head of the Thinking Ahead Institute, in a statement. "Critically this should also include future expectations that can inform investors' deployment and stewardship of capital."
The institute created a scorecard to monitor value-creation activities across a range of stakeholder groups and a four-step self-assessment framework to identify areas for improvement. It also recommended that the results of the assessment be communicated externally, particularly as stakeholders increasingly expect transparent communication of the value they can expect now and prospectively, Ms. Hall said.
