Can Impact Investing Go Mainstream?

Can Impact Investing Go Mainstream was a question at a discussion panel I was on a few weeks ago at the annual Impact Investment Conference hosted by the Kings Impact investment Society at Kings College in London, UK. The issue under discussion was the level to which impact investment has gone mainstream. I was invited to talk on impact investing in South Africa and was slightly surprised that the majority of the panel were under the impression that we were not yet at the mainstream level despite the majority of large investment funds today assigning at least a part of their portfolios to Impact Investment, while large consumer brands like Unilever and popular automobile brands like Tesla have gained in status due significantly in part to their involvement in society and environmentally beneficial initiatives. Interestingly enough, a survey done by Morgan Stanley in Nov 18 indicated that 84% of investors, including venture capital firms, in their network is considering or already active in Impact Investing. But I’m open minded enough to realise that yes of course we are far from where we need tube interns of real money being authentic in championing and prioritising the societies and environments that we all share.

If we consider the volume of investment needed to achieve the UN Sustainable development goals alone then it’s very clear that we have some way to go.

Can Impact Investing Go Mainstream

It was not long after this panel, when I started to wonder how long it will take for relatively small group of Impact Funds and the motivated investors and teams who support them to really make a dent in the large scale global challenges we face – the fast melting ice caps – income inequality, access to basic services and healthcare, housing – education and many social ills not even being mentioned here. For many investors and especially those with the potential to cause a real shift, the reality is that financial returns still trumps the social good that goes along with it. Make no mistake, recent studies by the Global Impact Investment Network (GIIN) found that impact investments are at least on par with non-impact funds in delivering financial returns to investors. The common perception though is perhaps still the opposite. – we need to find a way to shift market attitude. Solutions need to be found to influence the cultural behaviour of societies, organisations and the investors who support them to focus on scalable environmental and social solutions. It is time to take real action and create a critical mass of both evidence and investable opportunities that investors cannot ignore.

The graph below outlines the path or drift towards impact investing.

can impact investing go mainstream

The core focus and meaning behind Impact investing is centred around understanding and incorporating social and environmental factors into investment decision making – not only because it is the right thing to do, but because it will be the determinant of long-term value creation and the futures of the human race. If we are going to succeed at this we need to find more effective ways to connect existing players to the wider network of organisations that are involved in and support social investment. Even though Impact Investment has been around for circa 25 years, it can still be considered a relatively new industry. By providing both funding and skills, and by pursuing social investments in their core business, corporations are able to generate truly shared value and the necessary evidence for larger investors and community as a whole to become part of this movement.

If I had to look closer to home, in the past we have perhaps too often limited our focus on being too personal in our interest in impact. I’m personally a huge believer in education and the access to this by all. This has often tinted my view on the attractiveness of educational based opportunities. I have a strong belief and personal history with healthcare and perhaps might not have been writing this piece if it was not for the ready access to health experts I had in my past. But these are all my experiences and if we are going to be broadening the scope and opportunities of impact, then it will need to be relevant and value adding to all of our communities and the very diverse interests in the investors and organisations we hope to involve.

Imagine the possibilities and opportunities we can create these initiatives were widely adopted by Governments and corporations alike. if social and environmental projects became common place and core to the business objectives we create , if more Governments gave tax incentives for social and environmental practices and banks devoted as much of their resources and focus to impact opportunities as they do to their other investment practices. Imagine if the minions of people paying into pension pots could sway the pension fund managers to focus on impact opportunities which will ensure a better world for our children and theirs. These opportunities are all within our reach and with a bit more momentum and commitment we will be there soon enough.

So Can Impact Investing Go Mainstream?

Can impact investing make the leap from a niche practice to becoming a mainstream financial strategy? Lets look at some of the factors, challenges, and potential pathways for impact investing to go mainstream.

  1. Growing Interest and Awareness:

    The surge in interest and awareness surrounding environmental, social, and governance (ESG) issues has propelled impact investing into the spotlight. Investors are increasingly recognizing the interconnectedness of financial returns and positive societal impact, fueling the desire to align investments with values.

  2. Shifting Investor Preferences:

    A noticeable shift in investor preferences is underway, with a growing number seeking investments that generate both financial returns and measurable positive outcomes. As investors prioritize sustainability and social responsibility, the stage is set for impact investing to appeal to a broader audience.

  3. Integration into Traditional Investment Strategies:

    To go mainstream, impact investing must integrate seamlessly into traditional investment strategies. Incorporating ESG factors into mainstream investment decisions and portfolio construction can bridge the gap, making impact considerations a standard part of the investment process.

  4. Financial Performance Track Record:

    Demonstrating that impact investments can deliver competitive financial returns is pivotal for mainstream adoption. As more data emerges showcasing the financial viability of impact-focused portfolios, investors become more confident in allocating funds towards socially responsible ventures.

  5. Standardization and Metrics:

    Standardizing impact measurement and developing universally accepted metrics are crucial for providing transparency and comparability in impact investments. The establishment of industry standards ensures that impact performance is assessed consistently, addressing concerns and facilitating mainstream acceptance.

  6. Regulatory Support and Frameworks:

    Regulatory support and the development of frameworks that encourage or mandate ESG disclosures can significantly propel impact investing into the mainstream. Clear guidelines and regulatory incentives provide investors with the confidence needed to embrace impact strategies.

  7. Educating and Empowering Investors:

    Widespread adoption requires educating investors about the principles, benefits, and potential risks associated with impact investing. Empowering individuals with knowledge enables them to make informed choices that align with their values, fostering a broader acceptance of impact-focused investment approaches.

  8. Innovation in Financial Products:

    The financial industry’s ability to innovate and create a diverse range of impact investment products is crucial. Mainstream investors seek a variety of options that cater to different risk appetites, financial goals, and impact priorities, driving innovation in financial product offerings.

  9. Collaboration Across Sectors:

    Collaboration between financial institutions, governments, and nonprofit organizations can accelerate the integration of impact investing into mainstream financial systems. Building partnerships fosters an ecosystem that supports the growth and accessibility of impact investments.

  10. Measuring Long-Term Value:

    As impact investing gains momentum, emphasis on measuring long-term value becomes essential. Evaluating the lasting impact of investments on communities and ecosystems strengthens the case for impact investing as a sustainable and viable long-term strategy.

The trajectory of impact investing towards mainstream adoption is promising but requires concerted efforts across various fronts. As awareness grows, investor preferences shift, and regulatory frameworks evolve, impact investing is well-positioned to become a standard practice in mainstream finance. By addressing challenges, embracing innovation, and emphasizing the long-term value of impact, the financial industry can pave the way for impact investing to not only go mainstream but to become a driving force in shaping a more sustainable and socially responsible global economy.

But there are a number of key challenges that go along with this grand vision. The challenges that we are confronting are urgent and require big thinking. Time is not a luxury we have. So reflect on your approach to impact investing. Some of the very urgent issues for our field include:

Preserving impact integrity and overcoming the challenge of Greenwashing – This is a core issue and the measurement and agreement on measurement and standards by which impact promises and returns are judged is the very next frontier we are currently addressing.

Using Data and Technology for good – As both Big data and the use of communications to influence others has become a tool with which we can understand and influence the world faster and more effective, will those who hold the data take a stand to ensure that it is used for good?

Influencing Government Policy – The reality is that even though we expect that the Governments welcomed elect will be doing what is in our best interest, they too often are serving their own interests and financial supporters. We only have to look at the aggressive anti renewable energy policies taken on by the current US administration and the sharp reduction in green energy subsidies ad heavy investment in Nuclear energy initiated by the UK Government to tell us that the long term sustainability of our communities are not a major priority.

The Growth of Blended Finance – Blended finance is a strategy that combines capital with different levels of risk in order to catalyze risk-adjusted, market-rate-seeking capital into impact investments. This is a really opportunity for us to attract and engage with large scale investors but care should be taken to ensure that its both real financial returns as well as the important social and environmental aspects of impact investment which is on offer.

,The Caban Group has been involved in impact investing for the past 8 years. The business has also compiled a significant infrastructure of service providers who support entrepreneurs with access to business finance, support with restructuring, access to grant funding and support in improving cashflow challenges. Our ,Corporate finance team in the UK supports the South African head office to ensure you have the best possible chance of securing the support your business requires. Contact the team at Caban through the contact form on the website or by emailing Info @ Caban.co.za

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Matthew Musgrove

Matthew Musgrove

Matthew is an entrepreneur and business Advisor with a passion for change management and social empowerment. With a background in business accounting and advisory, as well clinical research project management, he strives to find strategic and sustainable solutions to business problems.

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MARK VAN HOFF

Mark Van Hoff comes from background of technical & production planning, budgeting & scheduling of major live events. As the first production co-ordinator at M-NET for Outside Broadcasts, Mark has managed major local and international productions including Miss South Africa, Miss World, multiple music events and major sports events, including the PnP Cycling Tour.​Mark co-founded Van-Man Productions in 1994, Page to Picture in 2000 and Move Media Networks in 2007. All three companies have achieved domestic success and have been well-regarded in the South African production industry.

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OLUWASEUN ADEWUYI

Oluwaseun Adewuyi who is the Group Chief Finance Officer (CFO) at Caban, is a Certified Chartered Accountant, with Fellowship status at both the ACCA as well as the Institute of Public Finance and Accountancy, a UK Based industry body with a specific focus on the management of charities, not-for-profit organisations and NGOs.. Oluwaseun comes with strong business acumen and 20+ years of progressive experience in finance and operations management within well-reputed and high growth organisations Including Next Plc and Royal Mail. He has been heavily involved in impact investment across Sub-Saharan Africa and has been instrumental in the creation of a series of community schools in West Africa. Throughout his career, he oversaw a broad range of operations, including Business Strategy and Business Reorganisation, summarising the organisation’s financial status, and coordinating the preparation of tactical plans, financial forecasts, and budgets. Adept at developing and implementing effective internal control framework to maintain sound financial accountability.

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TIM SCHOLTZ

Tim Scholtz, who's is the Chief Operating Officer (COO) at Caban Investments, is experienced in implementing corporate governance guidelines, formulating risk management structures, process and cost optimization. Tim has a strong corporate background, having worked as COO at the South African Tourism board, was COO at the Nelson Mandela foundation and as a internal audit manager at Arthur Anderson earlier in his career.

Ben Botes

BEN BOTES

Ben Botes is Entrepreneur, VC, co-Founder, Author and Academic with a strong social conscience. Ben Involved with early stage and growth firms for the past 20 years and has been Co-founder of 9 separate businesses across Africa. Ben has directly and indirectly been involved in impact investment and the support of charities and non profits for the last 30 years. Ben is a regular speaker at the African Investment Conference in London and has been featured in Wall Street for Europe, The Guardian Small Business, BBC, the Mail and Guardian in the UK and BizCommunity, Channel 3 TV, Investors Weekly, The Cape Times, Radio 702 with John Robbie and Good Hope FM in South Africa

Dave Romero

DAVE ROMERO

Dave Romero is a venture capitalist and entrepreneur with a passion for making an impact. A qualified Professional Accountant, Dave has been a director in multiple financial institutions and was once the youngest Chairman on the JSE, in addition to being listed as one of Business Times’ Top 100 companies and the 40th fastest-growing company in South Africa. Dave is a core founder of the Caban Group, which aims to provide a comprehensive service offering to small businesses in return for equity. With a passion for nurturing entrepreneurs, Dave can often be found outside of the boardroom – offering advice, creating innovative funding solutions and building communities through sustainable practices.

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Dr RUBEN RICHARDS

Dr Ruben Richards is a truly inspirational South African leader. Through his peace-building seminars for criminal gangs, Dr Ruben has facilitated the longest ceasefire in the history of gang warfare on the Cape Flats. In addition to being Chairman & Founder of the non-profit Ruben Richards Foundation, Dr Ruben is an ordained cleric, company director, non-executive Chairman of Visual International Limited and was once the Deputy Director-General of the now-disbanded Scorpions.