Impact Investing is Trending
Impact investing has been a buzzword on the rise in the last few years. While the idea of making investments that not only generate profit, but also has positive social or environmental impact has been done for decades, it’s only recently gained main-stream popularity. Impact Investing, defined by the The Global Impact Investing Network (GIIN) as “investments that primarily aims to create beneficial social and environmental impact while generating financial return and value,” is currently a $502 billion global market, and growing.
The Evolution of Impact Investing:
The evolution of impact investing over the last two decades has proven that capital is king when it comes to having real impact. 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.
Venture Capital (as we’ve explained here) has shown to not be the best way to approach impact investing. Since energy, water, and food are the largest industries in the world, it takes an immense amount of financial support in order to strategically transform these industries.
The Difference Between ESG and Impact Investing
ESG and Impact Investing are often confused, and rightly so. However, they are pretty different from an investment approach.
→ In a nutshell, ESG investments look mainly at the company operations and determine whether they have “positive” environmental, social, and governance metrics, or at the least, no “negative” metrics.
→ On the other hand, Impact investing pays more attention to the actual products and services that a company is offering that have a more direct impact in the areas of sustainability and social welfare.
Graph retrieved from Technically Philly
In general, ESG allows investors to ensure they are not investing in companies with a net negative impact, whereas impact investing ensures there is a net positive impact.
The demand for impact investing is higher than ever today, and continues to grow. At Transformation, we are taking the opportunity of this demand to create sustainable and high-impact projects in the areas of energy, water, agriculture, and technology.