Vienna, February 13, 2019 - This, at least, is the opinion voiced by Andreas M. Rickert, CEO of PHINEO, an independent, not-for-profit analysis and consulting firm, in an analysis published in the „Deutschen Nachhaltigkeitsalmanach 2018: Thesen und Taten. Transformation!“ (German Sustainability Alamanach 2018: Hypotheses and Practical Application. Transformation!). The publication can be found on the website of the Council for Sustainable Development under www.nachhaltigkeitsrat.de
It sounds like a contradiction, but as a matter of fact, it is not. Ever more investors use their capital with the intention of not just generating a financial return, but improving our social and ecological well-being at the same time.
So, what exactly is impact investing? Generally, it is “investment capital that is being purposefully used to counteract social and ecological challenges, while at the same time ensuring that there is no loss of capital – and ideally some return on capital,” says Brigitte Mohn of Bertelsmann Foundation that is also active in the field of impact investing. For her, the most outstanding characteristics of impact investing are intentionality and a commitment to measuring the beneficial effect.
The latter will influence the growth of the market segment impact investing, argues Rickert. After all, if the social impact of an investment is to be an equally decisive factor as risk and expectation of return, it is necessary to define impact, measure it and make it transparent to the investors. For this reason, investments are generally subject to a due-diligence-process where risk as well as the impact potential of the enterprises that will receive their capital are analyzed beforehand.
Impact investing can also be linked to the United Nations Development Goals (SDGs) – for instance, growth capital can be invested directly into a so-called “impact venture” that is aligned with one or more SDGs. There are, for instance various impact investment funds that orient their investment strategy towards the SDGs by selecting investments that are aimed at achieving particular SDGs such as eradicating poverty or fighting for quality education.
In this case, impact indicators are needed to make the respective contribution of the investment in question to the Goals visible and measurable.
Impact investing can also be targeted at so-called impact start-ups that provide products or services aimed at helping people who have so far been excluded from full participation in society because they are disadvantaged in some ways – either through lack of education, financial means or health issues.
Examples are enterprises such as auticon or discovering hands that help integrate people with autism respectively women who are either completely blind or have extremely poor eyesight into the job market. Through companies like the ones mentioned above, they get meaningful employment that enables them to support themselves. At the same time, the not-for-profit enterprises offer services that help other target groups as well. For instance, discovering hands is invaluable in the early detection of breast cancer. The women employed there are trained in a medical-tactile method that enables them to detect 30 percent more changes in breast tissue than doctors.
Meanwhile, there is a growing awareness among the financial sector of the fact that all enterprises have a social and ecological impact – either positive or negative. A sustainable financial system can only develop if the financial markets take these effects into consideration and begin to regard them as of equal value than risk and return when taking investment decisions. Initiatives such as the Hub for Sustainable Finance make a valuable contribution to driving this change in awareness in the direction of becoming mainstream. Against this background, impact investments must beregarded as taking indeed an avant-garde role in establishing a sustainable financial system.
Inquiry and contact information