Investors and business sustainability
Your investments have a lot more power than you might think.
There are many ways you can make a positive impact towards creating a more sustainable world. If you are a business owner or in management, you can make decisions that push the business towards sustainability in various issues. If you are a consultant, you can convince your clients to use sustainability as a source of strength for them. If you are a designer or an engineer, you can put your expertise towards sustainable products and services.
Business sustainability can be driven by all these stakeholders. But the most powerful stakeholders who have the power to shift businesses towards sustainability is not the ones mentioned above.
Investors, individual or institutional, hold more power to cause sustainable change than anyone else. And that is why, as an individual investor or a professional working for an institutional investor, you hold more power than most in driving business sustainability.
And the way you drive sustainability in social and environmental issues is through impact investing.
Impact investing- what does it mean?
“Impact investments are investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return.”
This is how the Global Impact Investing Network (GIIN) defines impact investing. Impact investing is a method of making investments, regardless of whether you are an individual or an institution, to make a positive environmental and social impact with your investments.
But it does not view these investments as an act of charity. GIIN calls on investments made to be impact investments to at the very least, bring about the return of capital that has been invested. The intention is not to spend money on sustainable causes regardless of return. Rather, impact investing encourages looking for market-rate returns on investments made with social and environmental issues in mind.
This is reflected in the expectations of impact investors that are members of the GIIN as well. 67% of all those surveyed target market-rate returns on their impact investments. Only a small amount (15%) of impact investors are targeting returns that equal capital preservation.
And anyone who is looking for returns that are lower does not qualify as an impact investor. If there is not at least preservation of invested capital, it is no longer considered an impact investment. This is to say, impact investing or the GIIN does not call for acts of charity from individuals or institutional investors.
The GIIN calls on investors to continue to make financial returns on their investments while making sure their investments can cause positive changes in environmental and social issues in business.
Four practices of impact investing to drive business sustainability
To be considered an impact investor, your investment decisions must be driven by four core expectations. These fundamentals ensure that your investment decisions are in line with the expectations of impact investing.
The four core practices complement the definition of impact investing and helps impact investors make the right decisions to contribute towards social and environmental sustainability in business.
Intentionality
There must be an intention to create a measurable social or environmental impact. Other forms of investments that consider impact may lead to these positive changes as well.
But what sets impact investing apart is the intention to create these positive changes from the very beginning. Impact investors aim to solve these problems and address opportunities that arise in solving these problems.
Use evidence and impact data in investment design
Impact investments are not supposed to be made on hunches or feelings.
The decisions of impact investors must be driven by data. The data on the potential impact as well as the potential financial performance of an investment opportunity must both be considered in the decision-making process.
Manage impact performance
Impact investors are expected to take an active interest in their investments to ensure that their intentions are met.
There must be strong lines of communication to others in the investment chain to ensure they are supported in their work towards achieving the intended positive environmental and social impact.
Contribute to the growth of the industry
Impact investors are expected to share their knowledge and expertise (where possible) with the rest of the industry to contribute to the growth of impact investing.
They are also expected to use shared terms and indicators to describe their impact investing strategies, goals and strategies.
Is impact investing a globally accepted concept?
Impact investing is very much a term or concept that is in its early days. But that doesn’t mean it is not already widely adopted by investors.
As of June 2020, the size of total impact investments is estimated to be around $715 billion.
And this number can only be expected to grow, as more and more investors integrate sustainability into their investment decisions. This is why the next few years will be a great time for any business that focuses on sustainable solutions.
And these investments are performing strongly in the financial sense as well. According to the GIIN, over 88% of impact investors reported that their investments met or even exceeded their expectations.
There are advancements being made in key areas like renewable energy and energy efficiency seemingly every day. And as these technologies begin to become more commonplace, investors will be ready to support them with their impact investments.
Why the rise of impact investing matters to your sustainable business
While you are not likely to feel the impacts of the growth of the impact investing industry within the next year, the growth trajectory means there is an opportunity there for you to take.
As the number of investors joining the GIIN and adopting the impact investing practices grow, they will continue to look for investment opportunities that allow them to meet their intentions. Any business that helps make improvements in social and environmental sustainability issues in business is bound to be instantly attractive to these impact investors.
The GIIN even manages an Investors’ Council, where leading impact investors convene.
All this means that there is now more incentive than ever for your business to adopt environmental, social and governance (ESG) concerns into its short and long term strategy and goals. And if the opportunity arises, look for ways to offer sustainable solutions that will make your business more attractive to the growing portfolios of impact investors.
How SUSTINARO can help your business attract impact investors
SUSTINARO believes in sustainability that makes sense.
Your efforts to become environmentally and socially sustainable must be communicated properly to all the relevant stakeholders. And these potential investors which include impact investors, are chief among them.
With our focus on sustainability communication strategy and planning with the engagement of stakeholders in mind, we can help make your business’s social and environmental sustainability clearer to the investors.
By presenting your business sustainability and your positive impacts on social and environmental issues, you can attract the attention of the sustainability-focused impact investors. Connect with us today, and take your most important step towards business sustainability through sustainability communication.