Already we have seen large investment banks dip their toes into the impact investing space, allowing their clients to invest money into social enterprises to achieve both a financial and social return. Impact investing is predicted to be a billion dollar industry and is expected to take off over the next ten years as more and more people choose to put their money in companies that deliver profit and tackle society’s problems.
Mario Marconi, Head of Philanthropy and Values-Based Investing at UBS, explains that the number one priority for the sector today is to work on the demand and supply. Demand is to educate investors on impact investing and supply is to find investment opportunities. Both sides seem promising.
Demand – The Young and Wealthy Look to Impact Investing
Recognizing a shift of wealth from older generations to younger generations and that too few wealth-holders are becoming social impact investors, the Nexus Global Youth Summit began in 2011 with aims to inspire the young and wealthy, connect them with social entrepreneurs and leaders from around the world, and mobilize young global philanthropy and social investment. Following the first event’s success, the Summit is back again this year and will take place September 19 to 22 in New York City.
The Summit wants to reach people like Liesel Pritzker Simmons, 28, and Ian Simmons, 36, who according to Barron’s are looking for young companies to invest in that can deliver both positive social impact and profit. In the public eye, Liesel Pritzker Simmons is famously known for suing her family and forcing the breakup of the Pritzker family’s assets, but she and her husband are also keen on investing in agriculture in Colombia and affordable housing in East Africa. At the age of 25 she made a philanthropic gesture to donate $4 million to Opportunity International to help support microfinance development in Africa. She is also the founder of Young Ambassadors for Opportunity, a network of young professionals who aim to inspire, educate, and involve others in microfinance.
“We don’t have children yet,” says Liesel, “but we ask ourselves, ‘What do we want them to know about how we invest our money?’ “
Supply – A Growing Marketplace
The Simmons had hired impact investing consultant Jed Emerson to guide them in converting their traditional investment portfolio but realized that there was a lack of investment opportunities for them to be able to unwind current investments.
“There just aren’t enough of the companies creating solar panels or turning sewage into fuel while turning a profit,” says Liesel.
Initiatives such as B Lab’s B Corp certification gather companies with a social mission and enable such a marketplace to find investment opportunities. Similar to Fair Trade, Organic, and Leadership in Energy and Environmental Design, firms apply for the B Corp certification and are evaluated based on their impact to workers, community, the environment, and internal governance. They are required to amend governing documents to ensure that their social responsibilities don’t get sidetracked. To date, there are over 600 (and growing) B Corps around the world.
If the Trend Continues
As an increasing number of investors like the Simmons seek socially responsible investments and the market for social firms matures, we can expect to see the impact investing sector truly take off.
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