Impact investing: the powerful new trend
At a personal or corporate level, if you have spare cash, you’re often advised to invest, to create wealth.
It’s a simple principle: investing will allow you to grow your investment portfolio, with stocks, bonds, real estate, and private businesses offering returns on your investment over a long-term period. Investing your wealth wisely, enables you to build and creates more wealth over time.
But what about how you invest? What if your considerations went further than simply what’s the safest, or the most lucrative, option for your wealth creation?
What if the consequences of your investment choices were overall positive to society, leading to greater gains – not just for your bottom line, but for broader social and environmental good as well? What if your investment could have a positive impact?
This is “impact investing”, and there is a growing shift towards it that is garnering the attention of investors the world over.
Why impact investing?
Many leading early adopters have been successfully experimenting with impact investing. Through helping to solve social problems, they are proving that there is room for both social impact and profit-making.
One success story in Australian impact investing is Barry Palte, chairman of private investment group, EQ Capital Partners. Palte is an investment expert whose primary focus is on sustainable investment and achieving positive social outcomes.
“The thing I look for is explicit positive social impact,” he says. “Plus, a passionate and aligned team, an organisation which is based on ethics, trust and shared values, and its ability to manage risk, in addition to having the potential to be globally scalable.”
An investment market veteran, Palte’s experience dates back to the ’80s. Since then, he’s seen trends come and go with the ups and downs of the markets, and has been significantly influenced by the constant truth that most people, deep down, appreciate the idea of being able to invest and create greater social good.
“I have a strong sense of purpose,” he says. “It may sound morbid, but a lot of my decisions are based on how it would reflect on me, on my legacy, once I’m gone.”
“My decisions comes down to a single, overarching question, and that is ‘what will my family, friends and business partners be reflecting on at my funeral? What good did I do?'”.
ROI – what’s in it for me?
Good question. The benefits of impact investing are far greater than simply financial gains for the individual investor.
“Sustainable impact investment returns come from delivering tangible benefits to people and the planet,” explains Palte, noting how the need for such investments is huge and growing, and as a result, high financial returns are very achievable. “But not at the cost of people and the planet.”
Wanting to make financial gains, and a desire to make environmentally and socially sustainable business decisions, don’t have to be mutually exclusive. On the contrary, they can be naturally complementary.
In fact, in 2020, it is becoming increasingly desirable that having some sort of positive social impact is a prerequisite for investors. Astute investors will be looking to ensure that returns are both financially and explicitly mapped to the achievement of positive social impact.
“In a world dealing with bushfires and climate change – and now the coronavirus pandemic – coupled with ongoing global political tensions, people of good will and ‘light’ have an obligation to develop an understanding of how to translate those in order to deliver concrete business outcomes,” Palte concludes.
“We are in a dangerous time in history, and the world is in desperate need of inspiration, passion, and solutions.”