What is Impact Investing?
Some people think we come to the world with a sole purpose, a mission which will complete us and fulfil us. Others may think life is about wondering and living. Nonetheless, what’s exciting about that, is what each one of us makes out of every situation, and how each of our decisions adds up.
Either way, if you belong to the first or second group, you are aware that the world is full of problems and opportunities. Some people will try making a small but important difference: being active in their communities, being nice to people.
However, others will create a solution to change the life of many people, as many as possible. They will try to shift the situation by committing to their mission and their project while having a positive impact along the way. To create high stake solutions that impact and create a significant change in lives, impact investing was developed.
Impact investing are investments made with the intention to generate positive, measurable, social, and environmental impact alongside a financial return.
The world is urging for solutions that generate a real impact in the way we live, for example: To
counterbalance the effects that have led to global warming; to improve the education and its accessibility to children in developing countries. The following article will discuss, what is impact investing, key elements, its market value, and finally, will provide examples along the way of causes and players of the industry.
What is impact investment?
The human is always thinking in ways to optimize resources, minimize negative impacts, maximize positive impact and of course, profit. Thus, the world is full of opportunities, these opportunities are materialized in scientific discoveries, inventions and technological advancement that improves the quality of life for human beings.
Impact investment is the vehicle in which the human seeks to help itself and its existence with the environment. Like any other industry, impact investments seek an economical benefit or return.
As a consequence, the market estimation value has increased and entrepreneurs can value their ideas to create a greater good. The estimated value of impact investment as of 2020 is 715 billion USD according to the Global impact investing network (GIIN) in its annual impact investor survey.
The analysis examines the supply of capital allocated to impact investing in 2019. The GIIN estimates that over 1,720 organizations manage USD 715 billion in impact investing assets under management.
Investors who follow impact investing consider the company’s commitment to corporate social responsibility or the duty to positively serve society as a whole. Two ways of addressing impact investment include: Socially responsible (SRI) and environmental, social, & governance (ESG), although others may be considered.
Besides generating a greater impact in society, studies show that the median impact fund is 1 percentage point below non-impact profit funds (6.4% impact to 7.4% non impact).
There are specific funds that aim to boost entrepreneurs with an impactful yet responsible cause. Some of the funds specialized in regions of the world such as Vital Capital Fund, others in causes such as Triodos Investment Management. The idea is simple, to generate as much impact without overseeing the return of investment.
Below, you can find examples of Impact investment funds and their primary interests will be presented.
Vital Capital Fund
Is a private equity fund with approximately $350 Million in assets. The primary investment focus is on the development of infrastructure, housing projects, agro-industrial projects, renewable energy, health care, and education. The fund invests in developing areas, principally sub-Saharan Africa, in businesses and projects designed to enhance quality of life.
Triodos investment management
The subsidiary of the Netherland bank Triodos bank has been active since 1995, its publication is estimated in 5 billion USD. Their primary areas of interest include renewable energy, sustainable food and agriculture (including organic farming), health care, and education. Triodos is one of the founding members of the Global Impact Investing Network, and its investments spread across Europe, South America, Africa, India, and Southeast Asia.
BlueOrchard Finance S.A
Operates in more than 80 emerging and frontier markets around the world, including areas in Asia, Latin America, Africa, and Eastern Europe. It provides both debt and equity financing to businesses and institutions, with an emphasis on alleviating hunger and poverty, fostering entrepreneurship, establishing food production and education programs, and working on climate change issues.
Impact Investing is just around the corner: Join the revolution!
Why are these funds impact-investing? Because, understanding that the solutions to the current problems the world is facing, are inside the mind of people crazy enough to think they can change it. To fix the world we live in is not an option, but an obligation that each one should take personally. Impact investing is not only a way of helping to heal the world but an opportunity for great returns as well.
If you think you can do more to contribute to a cause, let's talk! Also, if you are interested in impact investment, send us an email or comment here, I'm sure we can add value to your cause.
The GIIN org, Investopedia, Triodos investment fund, Vital Capital Fund, Blueorchard Finance S.A.