Impact investments are investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return. Impact investments can be made in both emerging and developed markets, and target a range of returns from below market to market rate, depending on investors’ strategic goals.
The embrace of impact investing by large asset managers such as BlackRock, combined with increased interest from institutional investors such as pension funds and insurers, shows that the industry is going mainstream.
TYPES OF IMPACT INVESTMENTS
The opportunity for impact investments varies and investors may choose to put their money into emerging markets(EM) or developed economies. Impact investments span a number of industries including:
- Energy, especially clean and renewable energy
- Climate change
- Rural development
- Waste management
Green Investments: The world is going green, from recycling and power generation to organic groceries and sustainable fisheries. Everyone —including climate change scientists, businesses, consumers and politicians is interested in easing the burden humanity places on the environment.
TOP GREEN INVESTING OPPORTUNITIES
Green Power Investments: Power generation that doesn’t rely on the burning of fossil fuels to generate electricity for our homes or industries is creating a growing number of investment opportunities. Water, wind and solar are among the top sources of renewable energy.
WindPower: Wind is one of the fastest-growing sources of renewable energy, having increased 75-fold over the past two decades.
Geothermal: Geothermal energy uses heat from the earth to produce clean energy. Ormat Technologies(ORA) builds, owns and operates geothermal plants, with operations in the U.S., Guatemala, Guadeloupe, Honduras, Indonesia and Kenya.
Green Transportation: On a smaller scale, researchers are working with fuel-cell technology to develop an alternative method of powering automobiles.
Aquaculture: Sustainable fishing is another food-related investment opportunity that is generating attention as the plight of the world’s overfished oceans impacts the human food chain.
Climate change is the single greatest challenge humanity has ever faced, threatening water and food security, health and livelihoods. But climate change has also been called the ‘greatest investment opportunity in history, with an estimated value of around 10% of global GDP.
The Sustainable Development Goals (SDGs) are a collection of 17 interrelated global goals, detailed by the United Nations, that target ambitious progress by the year 2030 against a broad range of issues, including poverty, hunger, health, education, climate change, gender equality, water, sanitation, energy, the environment, and social justice.
Gender lens investing (GLI) is a thematic environmental, social, and governance (ESG) strategy that is inspired by women in leadership (WIL) and related gender equality criteria. Gender lens investing is a term that is becoming increasingly common as more investors and financial institutions are adopting the strategy.
Along with the traditional industries and concerns associated with impact investing, such as environmental sustainability and poverty, healthcare sector is where success is measured in improvements in disease progression and quality of life.
When targeting healthcare investment toward cures and treatments for diseases, smaller pharmaceutical companies offer an opportunity to make investments that are more likely to be put to R&D.
Some of the major impact investing firms are :
- The Ford Foundation
- The Gates Foundation
- Soros Economic Development Fund
- Vital Capital Fund
According to Global Impact Investing Network, the current market size of the industry is valued at $715bn, based on the assets under management of ~1,720 impact investors around the world.
For details on Industry Analysis and trends please feel free to refer to the following Impact Investing Industry report from CrispIdea: