Impact investing, more than a trend
The various problems that humanity is facing require urgent global action and are beginning to interest investors around the world. Many companies, especially in the private sector, are beginning to orient their activities with the explicit goal of creating positive social or environmental change.
What is impact investing?
Impact investing is therefore a strategy through which investors seek to use their funds to generate financial returns while ensuring positive social and environmental impacts. A growing number of companies and organizations wish to contribute to projects aimed at fighting the current climate crisis and achieving the 17 United Nations Sustainable Development Goals turn towards investment opportunities that offer a positive impact.
This type of investment can target various sectors such as sustainable agriculture, renewable energy, microfinance, conservation, and basic services.
Investors aim to inject funds into for-profit organizations, corporations or even non-profit organizations that offer solutions to social or environmental problems. Depending on the strategic objectives of the investors, this practice targets emerging and developed markets with a range of returns at or below market rates.
Characteristics of impact investing
Certain characteristics are crucially important in impact investing and differentiate it from other types of investments :
The investor's intention
The intent must be to generate positive change through these investments (capital, products, services or activities). This type of investment focuses on investments that guarantee a well-defined financial return and social or environmental impact.
A measurable impact
It is the commitment to measure, but also to report social and environmental performance. The investment strategy must be based on long-term quantifiable aspects and progress must be reported transparently. This investment must translate into a measurable impact on the ground.
Performance
Issuing entities (companies, funds, for-profit or not-for-profit organizations) target financial returns ranging from a below-market rate, called concessional, to a risk-adjusted market rate and can be made in all asset classes.
Why investing?
Impact investing is a real revolution that revokes the era when investments were essentially aimed at achieving a financial return. Social impact has become the third factor in finance after risk and return, and it has become entirely possible to earn money while helping to solve social and environmental problems that were purely the work of philanthropic giving.
A fast-growing market
According to the Global Impact Investor Network (GIIN), assets under management related to impact investments increased from $120 billion in 2016 to $500 billion in 2018. Most companies are beginning to change their strategy and are increasingly investing in the achievement of the 17 sustainable goals to ensure long-term success. This sustainable strategy is becoming part of the investment market and offers more and more opportunities to promote social and environmental solutions.
Multiple advantages
The success of impact investing is well established; various institutional organizations and individuals are moving towards this type of investment, most of them reporting a risk-adjusted financial return in addition to a concrete impact. If the strategy focuses on the private sector, this return is increasingly attractive and offers a variety of other benefits such as sustainable, inflation-indexed revenues.
Positive impact
Impact investing is the ideal opportunity for any company to be true to its values and principles. It plays an important role in creating measurable change and, at the same time, improving the company’s rating. Indeed, companies that invest in environmental or social practices benefit from better profitability and a higher reputation than others.
According to GIIN's annual Investor Impact Survey for 2020, approximately 90% of investors confirm that their portfolio performance meets or exceeds their expectations in terms of social and environmental impact and financial performance in emerging markets, developed markets and the market as a whole entity.
Impact investing: a global trend
Who are the investors?
Impact investing attracts investors from all over the world, both individual and institutional:
- Fund managers
- Development finance institutions
- Diversified financial institutions/banks
- Private foundations
- Pension funds and insurance companies
- Governments
- Individual investors
- Non-governmental organizations
The market size
According to GIIN's annual Investor Impact Survey 2020, the current market size is estimated at USD 715 billion. A market that has been of interest to some organizations for decades is now seeing an international collaborative effort that is invading the market and accelerating its growth. A booming market that is arousing the curiosity of more and more investors who are optimistic about the development and effectiveness of the social and environmental impact to be achieved.
This movement in the financial sector comes at a time when humanitarian issues have become so important that the world is learning to put aside its differences and collaborate in the struggle to ensure a better future for humanity.
Viridis Terra for the restoration and sustainable management of ecosystems
Viridis Terra, through its impact investment fund Trees Of Lives, is helping to create a green economy around solutions to climate change. Our actions and decisions aim to have an impact on the 17 United Nations Sustainable Development Goals (SDGs). Our team brings the technologies to fight the global problems caused by land degradation and our integrated model allows us to scale up ecosystem restoration projects.
A social and environmental impact
We aim to provide governments, businesses and civil society with sustainable solutions for the restoration of degraded lands. We fight against the over-exploitation of resources and the loss of biodiversity and create solutions to defend humanity from these great threats. Our interventions with vulnerable populations to give them access to expertise and technologies, enable them to improve their living conditions.
Investing in a green economy
Viridis Terra, as a technology company, believes in the importance of investing, especially in this period of universal crisis, for sustainable management of forest and agroforestry ecosystems. Better use of natural resources is crucial in the fight against natural disasters and in improving climate resilience.
Each dollar invested in land restoration is worth about 30 times its value in global benefits. In this fight, Viridis Terra International partners with several companies, actors of society and various organizations that share its value and missions.
