The impact investment market is undergoing rapid growth. In Australia in 2018, total assets under management using an impact and community investment strategy increased by 72.5% (Responsible Investment Benchmark Report 2019 Australia – pdf).
(If you missed Part 1 of this article – you can find it here)
There is notable and unsurprising interest from the largest asset managers in the world. Inevitably, there will be opportunistic money seeking to take advantage of the rising tide. Both investors and funds, spotting an opportunity cash in. But the shift should be welcomed. While incredible work can be done on the fringes, a cataclysmic change is required.
Necessarily large capital is required to solve the biggest problems the world faces. The global impact investment market is US$502B (Sizing the Impact Investment Market – GIIN). And it’s estimated the cost of achieving the UN Sustainable Development Goals (SDG’s) and eliminate poverty and protect the planet by 2030 is between US$5 and $7trillion. Government will play it’s part (or not depending where you currently live) but impact investment will play a significant role.
So while not all capital will arrive with the right intention, it’s imperative that we cultivate this growing market.
I’m thinking of this new flow of money in two ways:
Lazy Capital – the investor who puts their money into a fund/company and gives it no more consideration than following the financial return.
Nurtured Capital – the investor who is actively seeking to learn, share and grow their capital, their impact and themselves.
A few ideas for how we can nurture our capital (for both new and existing impact investors):
- Read the annual report (for a fund or compacy) to understand what social and environmental impacts are being reported on. Are there other factors you think should or could be measured? Are they being true to label and doing what they said they would?
- Engage – do you have the capacity/capability to assist your investee business? Can you use your network to assist with new business opportunities to increase the positive impact they have?
- In listed equity funds, ask your manager how they vote on issues that matter to you. And why they vote a particular way if you disagree.
- I get that not every family office/foundation/individual wants to share their story publicly. However, this is a unique time and opportunity to lead. As new entrants arrive, impact role models will play a vital role in ensuring the impact is genuine. Helping those who come with a finance first mindset to embrace, appreciate and value the people and planet side of the equation equally.
- If not in public, consider sharing in private. New impact investors will benefit from guidance and inspiration. Join a discussion group or start one with your friends.
- Spread the word. You don’t know what you don’t know. Remember in the broader investment market, this is still a relatively new concept. It’s heartening to have a conversation with someone who lights up when you explain how they can use their capital as a force for good.
- If you use an adviser, question them on their knowledge and willingness to join you on this journey.
And finally – read and learn. Impact continues to change and evolve and so should your strategy as your knowledge deepens.
I’ve put together a collection of articles to get you started. You can find them here. You can find a more comprehensive list of books, videos and articles over at Small Giants here. You’ll find plenty more resources and articles at the Global Impact Investing Network and Toniic – the global action community for impact investors. And for the latest news on impact globally check out Impact Alpha. And if you like a podcast, one of the best you’ll find is the Good Future podcast.