The impact investment landscape has grown considerably over the last decade, with many large investment companies dedicating a portion of their funding to causes they believe in. In South Africa, impact investments are now span across a diverse range of projects, including agricultural initiatives, employment schemes, and early childhood development programmes.
What is impact investing?
Impact investing falls into the overlap between socially responsible investing (SRI) and investments focused on three key pillars – environmental, social, and governance (ESG).
SRI encompasses not only investing in causes that an investor believes in, but also making active decisions to avoid funding any companies that speak against their core values. Oftentimes, socially responsible investors will steer clear of businesses associated with any forms of gambling, weapons production and distribution, human rights and labour violations, harm to the environment, and involvement with addictive substances like alcohol and tobacco. By choosing to deny support for these industries, SRI allies itself with projects aimed at social and environmental betterment.
ESG investments take environmental, social, and governance issues into consideration when choosing where to invest, but the primary goal still lies in achieving financial gain.
In comes impact investing, where investments are made with the aim of measurably addressing local and global challenges, while simultaneously generating a financial return. Impact investments are future-focused, as investors seek to impress a longer-lasting and meaningful mark on the world with their funding schemes.
What does the impact investment landscape look like now?
While impact investing took place long before the term was conceived in 2007 by the Rockefeller Foundation, there has been a considerable rise in interest over the past decade. Investment firms, private foundations, NGOs, religious organisations, fund managers, and many others are part of the growing impact investment panorama, which has branched into an internationally collaborative space. Investors are connecting the world over to make a difference in the places that need it most.
The market is still developing, but holds much promise for the future according to a recent study performed at the end of 2018 by the Global Impact Investing Network (GIIN). According to data presented at the time, over 1,340 companies around the globe are actively impact investing a collective $502 billion. This is rapidly growing, and as the GIIN states in their report, “it must: trillions of dollars are needed to effectively address the critical social and environmental challenges that face the world today, such as those outlined in the Sustainable Development Goals (SDGs).”
Impact investment presence in South Africa
South Africa faces many ‘wicked problems’, where social, environmental, and political intricacies intertwine. Addressing these issues requires creativity, innovation, and of course, funding. While international investments are certainly playing a role in developing solutions to some of South Africa’s complex challenges, local investors are decidedly taking part too.
South Africa’s burgeoning impact investment presence spans across an array of focus points all coming together to speak to the country’s diversity and pressing gaps.
Some of South Africa’s impact investors include:
One of the most established insurance, investment, and loans groups in South Africa, Old Mutual dedicates a percentage of their funds to impact investment projects.
The corporation directs its impact investments primarily at areas where social infrastructure is lacking, including housing and education. Old Mutual also invests in small, medium, and micro-enterprises (SMMEs) as a form of boosting the local economy.
Tshikululu Social Investments
Tshikululu describe themselves as ‘agents of social change’, teaming up with a host of clients to make a positive impact on South Africa’s social and environmental issues.
STANLIB – Khanyisa Impact Investment Fund
STANLIB’s impact investing is all about reducing poverty, addressing inequality, and improving financial inclusion in South Africa. The fund is aligned with the core themes of the SDGs and is aimed at meeting a range of targets by 2030.
While not exclusive to South Africa, Goodwell does invest in projects aimed at countries in Sub-Saharan Africa. The firm is passionate about providing for the needs of the underserved and has partnered with clients that have worked to combat food security and high unemployment rates in Africa.
Since starting out in 2000 as an investment advisory business for South African Pension Funds, Novare has grown in its range of services and investments to become another cornerstone in South African impact investment. Novare aims its impact investments at ending poverty, responsibly stewarding our planet’s resources, and ultimately, creating a more sustainable world.
Benefits of impact investing
Impact investing has opened the door for investors to align their financial goals with their values. Investors have the expertise to put money to work and expect powerful outcomes. Now more than ever, investors are wanting those outcomes to measure up to more than financial gain alone. By impact investing, there is an opportunity to drive positive change while maintaining financial success and encouraging other investors to do the same.
The ever-growing potential for impact investment opportunities also means that investors can continuously recycle returns on impact projects to propel further change.
Impact investing has shown promising financial results for investors over the years, so employing money in this way by no means falls short of the returns traditional investments can generate, sometimes even exceeding these.
How to start impact investing
If you have been intrigued by impact investing, now’s your chance to start the journey.
- Get familiar with impact investing terminology.
Impact investing comes in many forms; learning what the subtleties between various acronyms and terms are will help you decide how you would best like to employ your funds to make a difference.
- Start speaking to investors in your network who have some experience with impact investing.
Expressing your interest in impact investing and starting conversations with those who already have some know-how will help you explore your options more thoroughly than if you did the research on your own. They may also have some useful advice to share regarding how to choose causes that align with your company’s values.
- Find a place to begin.
Actioning your interest in impact investing may be overwhelming at first with the abundance of investment opportunities increasing every day. Starting small helps to give you a sense of what impact investing involves, how fruitful it is both in terms of impact and financial return, and what really matters to you and your business. The first investment may hold the promise to turn into hundreds, but it all starts with the first step.
Impact investing holds the power to fuel exciting innovations and future-oriented solutions to address some of the world’s most critical issues. Globally, investors are collaborating with organisations and individual self-starters whose ultimate goal is to see change.
Aligning the financial goals of your business with its values will strengthen your company ethos and make what you do every day all the more meaningful.