Positive impact investments are investment approaches that seek benefits on both; eco-social and financial fronts at the same time. Business sustainability 4.0 is not only about surviving, making profit and growth but also encompasses social, environment and spiritual development of humanity. Issues such as climate change, social justice, inequality, global poverty, etc. have negative environmental and social consequences that directly affect the operating environments of any organization.
Corporate culture has taken positive impact investments into consideration especially since the implementation of both 17 Sustainable Development Goals (SDGs)[1] of the United Nations and the Paris climate accord (COP21)[2] has become an unavoidable obligation for businesses. Portfolio management frameworks today are not capable of taking Impact investments into consideration. Also, no systematic approach is proliferated to connect strategy, culture, impact, and investments from an organization’s perspective[3].
Rockefeller foundation defines impact investing as, “involving investors seeking to generate both financial return and social and/or environmental value—while at a minimum returning capital, and, in many cases, offering market-rate returns or better”[4]. Impact Reporting and Investment Standards (IRIS) and IRIS+ Global Impact Investing Network (GIIN)[5] projects have sought to provide a standardized taxonomy and a set of consistent definitions for measuring, managing and optimizing impact.
IRIS+GIIN makes it easy for businesses and individuals to manage impact themes, provide resources in terms of core metrics sets which include data on the five dimensions of impact namely WHAT, WHO, HOW MUCH, CONTRIBUTION, and RISK. It also provides guidance and research into the relevant areas for a proper Impact Measurement and Management (IMM) framework that can both be used by an individual as well as an organization alike.
Impact investors normally apply a theory of change which conventional investors do not do. The mission of impact investors is to “influence the financial markets by creating new sustainable assets by growing the eco-system of sustainable entrepreneurs, by growing the eco-system of financial intermediaries active in the field and by growing the investment community investing in positive impact. They normally choose an educate, innovate and incubate approach”[3]. They also consistently focus on thematic issues such as water scarcity, climate change, pollution, poverty, global conflict resolutions, etc. A systematic analysis and further in-depth details on various forms of impact investments can be found at BridgeVenturs.com[6].
Personally, I try to make sure and do invest in companies with an explicit strategic goal to have positive impact investment in the portfolio. I also try to look up at the leadership to make sure that they are high asset individuals who have been previously involved or have shown explicit intent on thematic issues. Do share your thoughts on your investment philosophies.
[1] – https://www.un.org/development/desa/disabilities/envision2030.html
[2] – https://unfccc.int/process-and-meetings/the-paris-agreement/what-is-the-paris-agreement
[3] – Wendt, K. (2018). Positive Impact Investing A Sustainable Bridge Between Strategy, Innovation, Change and Learning. Cham Springer International Publishing.
[4] – Jackson, E. and Ltd, A. (2012). Accelerating Impact Achievements, Challenges and What’s Next in Building the Impact Investing Industry. [online] Available at: https://assets.rockefellerfoundation.org/app/uploads/20120707215852/Accelerating-Impact-Full-Summary.pdf [Accessed 24 Oct. 2019]
[5] – https://iris.thegiin.org/standards/
[6] – https://www.bridgesfundmanagement.com/wp-content/uploads/2017/10/Investing-for-Impact-Case-Studies-Across-Asset-Classes.pdf
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