For those who are not familiar with the term ‘Impact Investment’, it is explained by the Global Impact Investing Network (GINN) as:
“Investments which are made into companies, organisations, and funds with the intention to generate social and environmental impact alongside a financial return”
Impact investments have four core characteristics:
- INTENTIONALITY An investor’s intention to have a positive social or environmental impact through investments is essential to impact investing.
- INVESTMENT WITH RETURN EXPECTATIONS Impact investments are expected to generate a financial return on capital or, at minimum, a return of capital.
- RANGE OF RETURN EXPECTATIONS AND ASSET CLASSES Impact investments target financial returns that range from below market to risk-adjusted market rate, and can be made across asset classes, including but not limited to cash equivalents, fixed income, venture capital, and private equity.
- IMPACT MEASUREMENT A hallmark of impact investing is the commitment of the investor to measure and report the social and environmental performance and progress of underlying investments.
Focussing on social, cultural, economic and environmental, impact investments target a range of returns from below market, to market rate [see diagram below].
Through impact investing, investors will have the opportunity to provide capital for addressing the world’s most pressing challenges in sectors such as sustainable agriculture, clean technology, microfinance, and affordable and accessible basic services including housing, healthcare, and education. Whereas it sounds as if impact investments are designed to fit emerging markets, there are plenty of impact investment opportunities in developed markets. I will make use of this feed to give some local (Guernsey) and global case studies.
* This page is provided only for informational purposes. It does not constitute investment advice. Past performance does not guarantee future results. Investments and strategies discussed herein may not be suitable for all readers, so readers should consult with financial, legal, tax or accounting professionals before acting upon any information or analysis contained herein.