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Increasingly, people want to be seen as making impact investments. Some in the socially responsible investing sphere, for instance, have started to describe their practice as a subset of a broader theme of impact investing. If there isn’t an agreed-upon definition, it is hard to measure its growth or much else about it.
This makes the definition used by the nonprofit Global Impact Investing Network, almost always referred to simply as the GIIN (pronounced like the drink), important. Speaking with co-founder and CEO, Amit Bouri, I asked for his definition. (You can watch our full interview in the player at the top of this article.)
“Impact investments are investments made into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return. Impact investments can be made in both emerging and developed markets and target a range of returns from below market to market rate, depending upon investors’ objectives,” he said.
Elaborating, he explained that impact investments could be made in virtually any asset class or any industry. “What’s common across the board is this commitment to impact at the heart of the investments. And that is also being done alongside a financial return.”
The GIIN is a Ford Foundation grantee. Xavier d Souza Briggs, vice president there, captured the essence of the GIIN’s work in impact investing, “For over a decade, the GIIN has provided the field’s most important and widely used measurement framework — IRIS. Recently, based on work with hundreds of investment professionals, entrepreneurs, and others worldwide, the GIIN launched IRIS+. My strong sense is that it will become the new gold standard and top resource for meaningful, comparable measurement of impact across the field.”
Briggs adds, “There is no meaningful ‘double bottom line’ without committed use of these kinds of measurement tools.”
Marilou Van Golstein Brouwers, former chair of Tiodos Investment Management, was a founding member of the GIIN’s Investor’s Council and now sits on the GIIN’s board. She says, “The GIIN’s work in impact measurement and management is all about helping the entire investment community become much more intelligent about how to achieve impact.”
Of the GIIN’s new IRIS+ offering, she says, “It is the only offering on the market that provides investors with core metric sets by investment theme, and/or linked to the SDGs, backed by evidence, and supported with practical guidance. It is designed to provide the data clarity and comparability that investors need to know if their investments are having the impact they want to achieve and helps them improve their impact over time.”
Recently, the GIIN made an estimate of the total global assets invested that meet its definition of impact investment, reaching $502 billion. To put that into perspective, the UN estimated that the world needs to invest $2.4 trillion per year through 2035 to prevent catastrophic climate change.
Bouri responds, “If we are going to move the money that is at the scale of what will take to mitigate climate change, we need to think about this on a whole different level. And we need to engage a much broader set of investors.”
Increasing the impact investing pool is only part of what Bouri sees as a three-part mission:
- One is how to mobilize more capital. Speaking directly to the question you asked. We need to be galvanizing more investors more institutions and putting more capital work in fast.
- The second goal is safeguarding the integrity of impact investing. Because we’re not just trying to achieve capital at scale. We are trying to achieve impact at scale.
- Our third goal is to actually galvanize a much broader movement around impact investing that really creates a social mandate around you know what is the purpose of capital. Because if we have built the financial system that sees itself as separate from the sustainability of the planet and our society we are always going to be going against the current.
One area that the GIIN has identified as an under-invested opportunity to fight climate change is forestry. The organization recently published a report on the topic.
“So, forestry has as a track record. It has a variety of different types of impacts it can achieve carbon sequestration, biodiversity conservation, land and water conservation as well,” Bouri says.
Given the scale of investing required—$2.4 trillion annually or a total of $38 trillion over the next 16 years—it is fair to say that the $502 billion already under management by impact investors is just a start. And that requirement only addresses climate change, ignoring most of the other UN Sustainable Development Goals. Here’s hoping the GIIN succeeds… quickly.
June 12, 2019 at 09:02AM
Forbes – Entrepreneurs