Affirmative Investment Management: a Thriving Firm and a Winning Strategy

Global manager AIM sets its sights on tackling the world’s problems by mobilising mainstream capital for impact.

Affirmative Investment Management (AIM) is a dedicated impact fixed-income specialist.

The vision is to mobilise capital to address the major challenges facing the world. The company focuses on managing portfolios that generate mainstream returns alongside environmental and social impact.

Based primarily in London, with colleagues in Australia and Japan, Affirmative Investment Management (AIM) manages over $1.2bn in assets for clients around the world.

Affirmative Investment Management (AIM) promotes transparency, measurement and reporting of impact, which includes ongoing monitoring of the use of proceeds and reporting, ensuring that investors have full awareness of how their capital is being invested. This culminates in detailed annual Impact Reports for all funds and portfolios.

Affirmative Investment Management (AIM)’s business is aligned to how the company itself invests. Its corporate sustainability structure is supported by four key pillars: people, climate, clients, and community. This reaffirms commitments such as the alignment of the business, portfolios and operations with the Paris Targets to limit global warming to 1.5°C — including net-zero GHG emissions by 2050. AIM’s annual corporate sustainability report clearly articulates the firm’s goals and progress.

Affirmative Investment Management applies a three-step investment process: verification, portfolio management, and measurement and reporting.

The SPECTRUM Process

SUSTAINABLE — Aligned with SDGs and the Paris Agreement on Climate Change.
POSITIVE EXTERNALITIES — Positive environmental and/or social externality associated with issuance.
ETHICS and ISSUER CONDUCT — Issuers must have appropriate governance, policy, and operational conduct.
CREDIT — Issuers must be financially credit-worthy.
TRANSPARENT — Clear and transparent investment policies and processes on reporting and disclosure.
RESPONSIBLE ISSUER — Issuers must have integrity and high ESG standards, as well as a clear commitment to a sustainable model.
USE OF PROCEEDS — Ability to determine use of proceeds in the issuer framework to assure AIM criteria are met.
MEASURABLE IMPACT — All securities must offer mainstream market yields and provide reporting on the material and measurable environmental and social impacts.

Verification encompasses sustainability and credit assessments, and is a crucial first step in defining the investable universe. AIM’s verification process, termed SPECTRUM, combines positive selection for impact, and environmental, social and governance risk assessment across a range of criteria at issuer and issuance levels. The result is an approved SPECTRUM universe of labelled and unlabelled green, social, and sustainability bonds. Every bond has a measurable environmental and/or social impact.

The portfolio management team solely manages portfolios for risk-adjusted returns against mainstream benchmarks.

The final step in the AIM investment process is the evidencing of financial returns and impact. A vital component of the firm’s philosophy is transparency for investors. Clients can annually monitor the impact of their investments via reports that detail portfolio-weighted use of proceeds allocation across sectors and geographies. There is also an independent assessment of greenhouse gas (GHG) footprints (Scope 1, 2 and 3), savings, and alignment with the UN’s Sustainable Development Goals (SDGs).

In 2020, AIM’s global portfolios funded more than 2,551 projects in 165 countries (that’s 75 percent of nations). Some 189,219 tonnes of GHG emissions were prevented from escaping into the atmosphere each year, a saving of 64 percent.

By collecting impact data in-house and engaging with issuers, AIM consistently achieves coverage rates of over 90 percent for all portfolios. Over 2021 AIM carried out 170 engagements with issuers. In line with its philosophy, AIM is transparent on methodology, seeking standardisation of impact reporting.

AIM also produces quarterly reports, which include example profiles on held issuers and issuance.

Calculation methodologies are disclosed in the appendix of reports, and AIM has worked on the Carbon Yield Methodology in 2016, partnering with ISS-ESG and Lion’s Head Global with funding from the Rockefeller Foundation.

AIM continues to innovate to deliver insights and meaningful reporting. This year, it will report project-level net-zero alignment for the first time, alongside emissions analysis. The sustainability team engages with issuers and has been conducting a thematic engagement on issuers’ net zero commitments across sectors. The outcome of this analysis will be featured in AIM’s impact reporting.

AIM’s European funds are Article 9 under the EU Sustainable Finance Disclosure Regulation (SFDR), the highest possible sustainability categorisation. Although not required until 2023, AIM is incorporating some SFDR metrics into this year’s Impact Report, reporting on the adverse impacts of portfolios alongside the positive and social impact achieved.