Over the recent years, we have come together on a global level with the desire and determination to successfully attain the United Nations’ Sustainable Development Goals — to eradicate poverty, achieve equality, improve the quality of life, and protect our environment. Many have taken action to help reach these goals. The question is, “where can we make the most impact and how?”
In our previous article, we have discussed how “capital is king” and that, “in order to truly solve some of the world’s greatest issues in energy, agriculture, food, healthcare, and general social wellness, we have to put serious economic focus into these areas”, this can be accomplished through Impact Investing.
What is Impact Investing?
“Impact Investments are investments made with the intention to generate positive, measurable social and environmental impact alongside a competitive financial market return” — (The Global Impact Investing Network)
Impact Investments help shape the future of sustainable and profitable programs. However, the journey of Impact Investing has not been easy.
The Problem with Impact Investing
According to Phenix Capital’s Impact Investing Asset Owner Report [PDF], there are several cited challenges in the past. Some of these issues are as listed:
- Lack of opportunity/size of market (there is a limit in opportunities both in market and finances making it difficult for large investors to come in)
- Execution: sourcing and evaluation (sourcing funds that not only have an impact focus, but also have adequate risk and return characteristics; sourcing investment opportunities that relate to specific areas; carrying out due diligence for all of the above)
- Lack of education, and/or disagreements between stakeholders (differing views of stakeholders, particularly between investors of different generations; the idea of impact and profitability as a simultaneous goal is split among investors)
- Scepticism and other gray areas of what can be considered “impact investing” (green washing has caused concern as well as lack of consistent use of standards to measure impact, and the concern that impact investing is still very new)
The good news is: all of this is changing. With the rise of applicable innovative technologies in the areas of energy, water, and agriculture, there are new ways of making impactful projects profitable and sustainable for the long term. Transformation, LLC redefines “Impact Investing” as: private investment in the markets of energy, water, agriculture and healthcare with the directed impact of improving the system efficiency in one or more of those markets.
Not only are there services that are improving the status of impact investments, but there has been and continues to be a significant growth in the demand for impact investing.
The Rising Demand for Impact Investing
Bonnie Chiu, a Senior Contributor at Forbes Author and Forbes 30 under 30 Social Entrepreneur discuss in this post how in this present generation, there is a more conscious consumption amongst consumers and how there is an existing pressure for leading companies to accommodate ethical and positive social impacts. She further adds how Millennials, a more globalized generation, are “the new investors” who are more open to international private and public markets, while on the constant lookout for greenwashing and impact-washing.
With this said, the year 2020 is looking to be the year where Impact Investing truly goes mainstream.
The Technology That Will Solve Some Of The Problems In Impact Investing
AI is transforming Sustainability in the area of agriculture, water and health:
What Is New/Trending In Impact Investing For 2020?
BlackRock, an American global investment management corporation and the world’s largest asset manager, has recently taken part in an Climate Action 100+, an investor initiative that ensures the world’s largest corporate greenhouse gas emitters take essential steps toward climate change.
“Trillium Asset Management, with more than $2.8 billion in assets, agreed to be acquired by Australian financial services firm Perpetual. It’s the latest transaction as sustainable investing becomes more popular.”
Climate becomes a priority in ESG, central banks are aiming to voice out and illuminate the risks in climate this year, Wall Street will create more pieces that tackle climate change, and global warming to open doors for profit and sustainable programs for the year 2020.
2020 is going to be a great year for impact investing for the following reasons:
A new generation of investors have arrived, and they are keen to create positive social and environmental impacts through sustainable investments with an eye that sees beyond borders, taking on global markets.
A number of large investors and corporations are placing importance to the trend of Impact Investing and creating strategies that cater to contributing positive action towards the Sustainable Development Goals.
The technology that we need in order to address our global crises is within our grasp.