Impact Investing : Can Economic Returns And Social Impact Be Achieved Together ?May, 06 2013
The real economy is more and more disconnected from the world of finance. The mountains of money created these last years by the central banks only strengthen this disconnection. The spectre of a return of pendulum is obvious. You should not wonder whether that is going to happen but when it is going to happen. To climb the Everest is OK, but one needs to come back safe and sound. So it is better to be well equipped.
It is imperative that the investors raise their head and define long-term asset allocation strategies based on tangible economic, social and environmental criteria. No compromise are even required. It is completely possible to obtain a maximization of the financial returns and the social or environmental impact. It is a question of combination. Responsibility ensues naturally from the durability, and vice versa.
The industry of the socially-responsible investment funds already exists. Certain administrators for example exclude voluntarily certain business sectors as the weapons or the alcohol, others select only the best companies by business sector (best in class) and others integrate voluntarily environmental, social selection criteria or governance. Some even try to give a precise direction to their investments and define themes and measure the impact.
Good grief it is possible to do it ! But … why no more? Get your gears and up !
To know more about what is done and can be develop see PGGM Responsible Investment Annual Report 2012
Clearly, impact investing is becoming a critical part of international development. By combining compassion with capital—and its inherent demand for return—countries are beginning to make unprecedented progress toward creating brighter futures for their people. Last week world leaders converged on the Beverly Hills Hilton this week to discuss the big issues facing us today. Among the topics discussed at the Milken Institute Conference was impact investing. You can find all the videos of sessions here.
Let me emphasize two of them which showed very practically what can be achieved and in what direction we can act :
A first panel led by Caitlin McLean with our good friend Dr Lawrence Coben, Executive Director, Sustainable Preservation Initiative (see his presentation at 45.30) focusing on : Galvanizing Global Growth.
Meeting the goals of global development, from improved health care to increased access to capital, requires a combination of aid and investment. Yet in frontier markets, public-sector funding has been limited and not entirely effective, while the private sector has been hesitant to engage. To overcome these constraints and attract a wider spectrum of investors, innovative models have been developed that build ties with foundations, governments, large financial institutions and corporations. From public-private investment funds to credit enhancements and donor-driven pull mechanisms, these new approaches can help to bridge funding gaps and strengthen local markets. The panel will present investment-led strategies that generate both social and financial returns while stabilizing the communities where investors have assets at work.
And second : The Art of the Deal
In recent years, impact investing has grown beyond a niche concept to emerge among mainstream investors and the high net worth community. Some of this stems from the challenge of finding returns among the usual investments in the current economy. World events play a role in heightening interest, as do concerns among the next generation of high net worth investors with the nonfinancial consequences of their ventures. A growing number of deals generate both financial returns and social or environmental impact. But how are the deals actually done? How can you make money and have impact? On this panel, experienced impact investors will delve into examples. What makes these deals work? What should investors realistically expect? What challenges should they anticipate? You can watch the entire session here