In 1989, Warren Buffett first coined the famous phrase “it's far better to buy a wonderful company at a fair price than a fair company at a wonderful price”. We are not here to argue that this is the exact date of the emergence of ‘Quality Investing’, as Peter Lynch was already an outspoken investor with similar ideas around that time, and Buffett himself had been investing this way a few years prior. Nonetheless, it’s a landmark for this investment style.

An important factor in listed impact equities is the concept of ‘additionality’ or, as Impact Europe puts it: ‘achieving positive outcomes that are better than what would have happened without the investment’.

Over the past three years, small-cap indices like the Russell 2000 in the US have lagged their large-cap counterparts. In Europe, small caps have also endured a steep correction, trading at historic lows relative to large caps. However, signs point to a potential turnaround. Easing inflation, stabilising supply chains, and anticipated shifts in monetary policy suggest that an active approach to small caps may offer compelling opportunities for equity portfolios.