Novare Impact Investment Partners
For all the noise against rising poverty, hunger and unemployment, the numbers are still going the wrong way. Yet, the world is awash with cash following an unprecedented stimulus that spurred stock markets to record highs, interest rates to all-time lows and a global scurry for everything from mielies to cryptocurrencies.
THIS PARADOX NEED NOT EXIST.
Impact investing is successfully meeting the overwhelming need to address social inequality, environmental degradation, and infrastructural gaps with the requirement that invested capital make a financial return. According to data compiled by the Global Impact Investing Network, impact investing has seen assets under management jump from zero to $715 billion in just over a decade — and most funds taking this approach by far outperformed their expectations.
While often lumped together with environmental, social and governance investment strategies, impact investing takes a different approach by looking for a more direct outcome. ESG funds, for example, buy stocks based on how well the companies manage risks such as pollution and work injuries or purchase bonds targeting green financing. Bloomberg Intelligence estimates that ESG assets will top $53 trillion this year.
Impact investors search for projects, companies or communities seeking to solve some of the world’s most pressing challenges. Once made, these investments are then objectively measured to determine how effective they are at making the world a better place, alongside a financial return.
The global push toward sustainable investment is shining light on the reality that investors can no longer bask in the glory of their rising wealth without turning that capital into something that will serve the broader needs of our people and our environment.
Society’s most vulnerable do not directly share in the benefits of soaring stock markets, higher commodity prices or record-low interest rates. On the contrary, the poor end up paying more for food.
Let us take booming agricultural markets as an example, where investors can quickly snap up commodity futures, agricultural exchange-traded notes or index funds, or other such products that are available to buy and sell. These will always be available, however, the most vulnerable in society barely have an opportunity to participate in financial markets.
TO MAKE A DIFFERENCE AND STILL MAKE MONEY NEEDS A FRESH PERSPECTIVE.
Where there is food insecurity due to supply shortages and surging commodity prices, there are opportunities. These can include the funding of an agricultural project to boost output, uniting communities or operations to improve economies of scale, building a processing plant, or better connecting producers to distributors. The benefits then become tangible through stable or even lower prices, improved workers’ well-being, and potentially a bigger market with a better chance of thriving.
Impact investing as an asset class is only beginning to play a role where shareholder interests merge with those of a broader group of stakeholders. Considering that governments no longer have the resources or means to meet their citizens’ needs in areas from energy and transport to health and education, there is plenty of room to grow and numerous gaps to fill.
With many of the gains made against poverty wiped up during the Covid-19 pandemic, the urgency to rebuild a more inclusive society is more desperate than ever. It is possible.
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Momentum Investments is part of Momentum Metropolitan Life Limited, an authorised financial services (FSP6406) and registered credit (NCRCP173) provider.