This article was provided by and expresses the views of Nancy Bikson, Managing Director at Chapel & York, a partner firm of the Beacon Gainer private client advisory services group.

“Impact investing is an exciting and rapidly growing industry powered by investors who are determined to generate social and environmental impact as well as financial returns. This is taking place all over the world, and across all asset classes. “ (GIIN)

Impact investments or socially responsible investments [although the terms are not always interchangeable] are those made in order to produce positive, measurable social good whilst still providing a financial return to the investor. Impact investments can be made in a range of markets and an increasing number of companies are specialising in offering these investment opportunities. Some investors are willing to sacrifice rates of return for added social benefits whilst others want to maintain the highest return possible, including market rates, depending on an investor’s strategic and societal goals.

The impact investment/socially responsible investment market supports some of the most important of the world’s problems including climate change, agriculture, energy, housing, healthcare and education.  Impact investments provide an alternative or addition to traditional philanthropic funds which have supported many of these causes and adds to the total funds available to solve many of the world’s most pressing issues. Both philanthropic giving and impact investing are growing and research suggests that the impact investment market alone exceeds over US700 billion worldwide.

There are a number of best practices for those involved in impact investing including:

  1. A definitive and understandable set of objectives which investors understand and support
  2. Return expectations which can range from below market to a risk-adjusted market rate
  3. Asset classes can include cash equivalents, fixed income, venture capital and private equity
  4. Measurable performance targets/metrics related to the objectives
  5. Monitoring the performance of the underlying investments against the performance targets related to the objectives
  6. Transparency and accountability in all respects of the investment and the work being supported
  7. A set of specific and verifiable evaluation of results

One of the leading players in the impact investing industry is the GIIN, the Global Impact Investment Network, which was founded in 2009.  In 2018 the GIIN defined their 4 Core Characteristics of Impact Investing to help investors define and understand what constitutes credible impact investing.

GIIN’s 4 Characteristics are:

  1. Intentionality

Impact investing is marked by an intentional desire to contribute to measurable social or environmental benefit. Impact investors aim to solve problems and address opportunities. This is at the heart of what differentiates impact investing from other investment approaches which may incorporate impact considerations.

  1. Use Evidence and Impact Data in Investment Design

Investments cannot be designed on hunches, and impact investing needs to use evidence and data where available to drive intelligent investment design that will be useful in contributing to social and environmental benefits.

  1. Manage Impact Performance

Impact investing comes with a specific intention and necessitates that investments be managed towards that intention. This includes having feedback loops in place and communicating performance information to support others in the investment chain to manage towards impact.

  1. Contribute to the Growth of the Industry

Investors with credible impact investing practices use shared industry terms, conventions, and indicators for describing their impact strategies, goals, and performance. They also share learnings where possible to enable others to learn from their experience as to what actually contributes to social and environmental benefit.

Donors and philanthropists and impact investors share the common goal of solving need and as the creativity of both the donor/investment side and the charity side of the process continues to evolve the excitement generated is only to the good for all.

Nancy Bikson

Chapel & York

22/02/2021