A few weeks ago, I was on a discussion panel at the annual Impact Investment Conference hosted by the Kings Impact investment Society at Kings College in London, UK. The issue under discussion was the level to which impact investment has gone mainstream. I was invited to talk on impact investing in South Africa and was slightly surprised that the majority of the panel were under the impression that we were not yet at the mainstream level despite the majority of large investment funds today assigning at least a part of their portfolios to Impact Investment, while large consumer brands like Unilever and popular automobile brands like Tesla have gained in status due significantly in part to their involvement in society and environmentally beneficial initiatives. Interestingly enough, a survey done by Morgan Stanley in Nov 18 indicated that 84% of investors in their network is considering or already active in Impact Investing. But I’m open minded enough to realise that yes of course we are far from where we need tube interns of real money being authentic in championing and prioritising the societies and environments that we all share.
If we consider the volume of investment needed to achieve the UN Sustainable development goals alone then it’s very clear that we have some way to go.
It was not long after this panel, when I started to wonder how long it will take for relatively small group of Impact Funds and the motivated investors and teams who support them to really make a dent in the large scale global challenges we face – the fast melting ice caps – income inequality, access to basic services and healthcare, housing – education and many social ills not even being mentioned here. For many investors and especially those with the potential to cause a real shift, the reality is that financial returns still trumps the social good that goes along with it. Make no mistake, recent studies by the Global Impact Investment Network (GIIN) found that impact investments are at least on par with non-impact funds in delivering financial returns to investors. The common perception though is perhaps still the opposite. – we need to find a way to shift market attitude. Solutions need to be found to influence the cultural behaviour of societies, organisations and the investors who support them to focus on scalable environmental and social solutions. It is time to take real action and create a critical mass of both evidence and investable opportunities that investors cannot ignore.
The graph below outlines the path or drift towards impact investing.
The core focus and meaning behind Impact investing is centred around understanding and incorporating social and environmental factors into investment decision making – not only because it is the right thing to do, but because it will be the determinant of long-term value creation and the futures of the human race. If we are going to succeed at this we need to find more effective ways to connect existing players to the wider network of organisations that are involved in and support social investment. Even though Impact Investment has been around for circa 25 years, it can still be considered a relatively new industry. By providing both funding and skills, and by pursuing social investments in their core business, corporations are able to generate truly shared value and the necessary evidence for larger investors and community as a whole to become part of this movement.
If I had to look closer to home, in the past we have perhaps too often limited our focus on being too personal in our interest in impact. I’m personally a huge believer in education and the access to this by all. This has often tinted my view on the attractiveness of educational based opportunities. I have a strong belief and personal history with healthcare and perhaps might not have been writing this piece if it was not for the ready access to health experts I had in my past. But these are all my experiences and if we are going to be broadening the scope and opportunities of impact, then it will need to be relevant and value adding to all of our communities and the very diverse interests in the investors and organisations we hope to involve.
Imagine the possibilities and opportunities we can create these initiatives were widely adopted by Governments and corporations alike. if social and environmental projects became common place and core to the business objectives we create , if more Governments gave tax incentives for social and environmental practices and banks devoted as much of their resources and focus to impact opportunities as they do to their other investment practices. Imagine if the minions of people paying into pension pots could sway the pension fund managers to focus on impact opportunities which will ensure a better world for our children and theirs. These opportunities are all within our reach and with a bit more momentum and commitment we will be there soon enough.
But there are a number of key challenges that go along with this grand vision. The challenges that we are confronting are urgent and require big thinking. Time is not a luxury we have. So reflect on your approach to impact investing. Some of the very urgent issues for our field include:
Preserving impact integrity and overcoming the challenge of Greenwashing – This is a core issue and the measurement and agreement on measurement and standards by which impact promises and returns are judged is the very next frontier we are currently addressing.
Using Data and Technology for good – As both Big data and the use of communications to influence others has become a tool with which we can understand and influence the world faster and more effective, will those who hold the data take a stand to ensure that it is used for good?
Influencing Government Policy – The reality is that even though we expect that the Governments welcomed elect will be doing what is in our best interest, they too often are serving their own interests and financial supporters. We only have to look at the aggressive anti renewable energy policies taken on by the current US administration and the sharp reduction in green energy subsidies ad heavy investment in Nuclear energy initiated by the UK Government to tell us that the long term sustainability of our communities are not a major priority.
The Growth of Blended Finance – Blended finance is a strategy that combines capital with different levels of risk in order to catalyze risk-adjusted, market-rate-seeking capital into impact investments. This is a really opportunity for us to attract and engage with large scale investors but care should be taken to ensure that its both real financial returns as well as the important social and environmental aspects of impact investment which is on offer.
,The Caban Group has been involved in impact investing for the past 8 years. The business has also compiled a significant infrastructure of service providers who support entrepreneurs with access to business finance, support with restructuring, access to grant funding and support in improving cashflow challenges. Our ,Corporate finance team in the UK supports the South African head office to ensure you have the best possible chance of securing the support your business requires. Contact the team at Caban through the contact form on the website or by emailing Info @ Caban.co.za