People are confused about what impact investing is, according to Melchior de Muralt, managing partner at Citywire Switzerland Top 50 independent asset manager De Pury Pictet Turrettini (PPT). For him, the definition should be clear: ‘You need to invest for additional impact – a specific, measurable sustainability impact.’

Parts of the asset management industry are contributing to this confusion. ‘There are a lot of funds that claim to be impact investing, but are only thematic or best-in-class funds,’ he says.

De Muralt has been a pioneer of sustainable investing since he joined PPT in 2001. In the same year, his firm co-founded the impact investing-focused asset manager BlueOrchard, which was acquired by Schroders in 2019.

According to De Muralt, the majority of impact funds available in Switzerland are focused on private equity and private debt. His firm created an impact fund concept for listed companies, called the Cadmos funds, in 2006. Engagement plays a crucial role in his approach.

De Muralt and his colleagues analyse sustainability issues of the companies they invest in, set up meetings with the investor relations team or other departments such as HR, compliance or sourcing, and push for change.

‘There is one way to create an impact in listed equities, which is to engage with portfolio companies on sustainability matters. If you as a shareholder actively promote sustainability issues and succeed in proposing those recommendations to companies, then you can claim to have an impact as an active shareholder – there is no other way,’ he says.

In addition, PPT publishes impact reports for its Cadmos funds, which provide detailed analysis of the firm’s engagement efforts. De Muralt admits that, sometimes, colleagues question whether it’s worth the effort.

‘I’ve had to push in-house to keep that level of transparency. Engagement is a new story. You can claim to do engagement by joining shareholder initiatives, but that is low-hanging fruit. We want to be shareholders who add value. And there’s no other choice than to report clearly on that.’

When it comes to impact funds that invest in private debt and private equity, De Muralt finds a range of external solutions that meet his impact-investing criteria. For example, the firm’s portfolios are invested in the BlueOrchard Microfinance fund, which helps to fund institutions that give loans to small business owners in emerging markets.

He also sits on the board of Impact Finance, a Geneva-based private-debt boutique. The flagship fund provides funding for small and mid-sized agricultural and food companies in Latin America. Last but not least, he likes Aqua Spark, a Dutch private equity holding company focused on sustainable aquaculture.

To analyse the portfolio of external impact funds, De Muralt uses a database from Phenix Capital, a data provider based in Amsterdam. PPT is one of its founding members. To analyse the ESG credentials of listed companies, PPT relies on the data supplier ISS.

But PPT also sponsors and uses Impaakt, a Geneva-based collaborative platform, that provides scores for companies’ social and environmental impact. ‘Impaakt is the Wikipedia of impact ratings,’ De Muralt says.

He believes clients have an increasing appetite for impact investing.

‘There are some people that are ready to get less return for higher impact, but that’s a minority. Then, there is a new generation challenging its parents’ generation in terms of the impact of their portfolios on climate change and other issues and asking for transparency. They ask for more impactful strategies.

‘But even those young clients are less enthusiastic once they face lower returns. Our clients need three things: a good risk-return profile, impact, and reporting. This is where wealth management will move progressively.’