Investing with impact in a post pandemic world

It’s inarguable the COVID pandemic has changed the way we think about our impact on society and the planet. We can no longer take for granted the systems that have supported us in the past. We must be proactive in our approach to creating a better future, one that is more inclusive, equitable, and sustainable. Something which is increasingly seen by the global Investment community as both an opportunity and a responsibility, directing significant funds to Impact Investing, although not everyone can agree on what ‘impact investing’ means or should be directed towards.

At its heart, Impact investing should intentionally seek to create positive social and environmental outcomes alongside financial returns but the challenge of course, is to identify and locate those opportunities.

While the COVID-19 pandemic highlighted some of the shortcomings of our current system it also created an urgency for change, with increasing investor demand for  new opportunities to have a positive impact on society and the planet. For anyone thinking about how to use their funds to make a difference in the world, now is the time to consider impact investing, with Political will, largely, supporting those efforts.

GIIN CEO Amit Bouri “Our new estimate of a global impact investing market larger than one trillion dollars represents a significant psychological milestone for the industry, as it matures and grows in sophistication,” 

Best spend?

The challenge for both retail and market investors is whether to invest directly in companies and organizations that are making an effort to address social or environmental challenges, such as renewable energy or clean water initiatives or alternatively, to purchase special purpose investments, like microfinance loans that provide capital for small businesses or social enterprises in underserved communities.

Increasingly, many companies and mutual funds now focus on ESG factors in their investment decisions with more and more regulation coming into force that requires ESG be factored into all investment decisions across the Board. The big question now is whether or not the carrot or stick is going to be used by Regulators going forward?

The issue for the market is reconciling the ‘feel-good factor’ of investments with the business case which is uncompromising in the need for the best ROI.

Over the past ten years, however, impact investing has grown into a sophisticated investment and risk management approach, giving investors the opportunity to include environmental, social and governance considerations into their investment portfolios without having to give up return.

Emerging v traditional Investing?

EM companies in general are at early stages in the impact and ESG journey. As a result, there is a long-term opportunity for investors to participate. The nature of EM means that there is also a broad range of investment opportunities. Providing capital to companies which meet defined investment criteria enables them to grow sustainably, and to have a greater impact in the future. 

Impact Investing v Emerging Markets - is it either or?

As more and more investors take their money out of traditional markets which seem to carry reputational and associated financial risks, many AM’s look towards emerging markets for ROI opportunities, which some believe is at a moment in time to consider impact investing.

Impact investing is especially relevant today as traditional markets experience disruptions due to global events. It has created an urgency for change and new opportunities for investors to move their money into emerging markets. ESG factors are also increasingly being taken into consideration when making investment decisions, giving investors the opportunity to invest in more ethical or sustainable businesses while generating ROI.

With higher numbers of impact investors entering the market, the potential for ROI increases. Investing with impact is no longer a niche area, but an increasingly popular way for investors to make a positive difference in the world while generating the right ROI.  

Investing with impact has never been more important than it is right now. With the right approach, investors can make a positive difference in the world AND potentially reap financial rewards at the same time.  The future of impact investing looks bright, and those who actively pursue this route, seem well-positioned to define themselves as thought leaders in this growing field.