More and more investors are looking beyond just financial returns. The concept of impact investing in assets that offer measurable social or environmental benefits as well as financial returns has come a long way from its modest roots in the early 2000s.
The relationship between the private capital markets and the well-being of society and the planet has become a hot topic. In 2015, in New York and Paris, the world’s governments signed up to ambitious goals to curb climate change and generate the sort of economic growth that benefits everyone, not just a wealthy minority – goals that it is estimated will require over $2.5 trillion a year of additional private investment. In response to criticisms of the capital markets causing the 2008 financial crash and the Great Recession that followed, some leading capital-market institutions have pledged to take a more long-term, sustainable and socially responsible approach to investing.
The growing demand for a more socially-responsible, purpose-driven finance has been best illustrated by the emergence of a new approach to putting capital to work called “impact investing.” Having started out as a niche activity, largely practiced by wealthy and philanthropically-inclined individuals, impact investment is now championed by a growing number of leading institutions in the capital markets. As a recent G8 task force on impact investing predicted, perhaps the 20th Century approach to investing, based on risk and return, will be replaced by a 21st Century model built on risk, return and impact.
These investors have greater choice than ever. Five years ago anyone wanting explicitly to combine financial returns with virtue was limited to investing in social housing for poorer people in rich countries, micro credit and a handful of ethical mutual funds that shun sinful shares such as tobacco and defense companies.
In June Impact Assets published a list of the top 50 impact investors, ranging from Blue Orchard, which has invested around $1 billion in micro credit, to IGNIA, which is investing its first $100 million fund in growing small businesses in Latin America and is about to start raising a second fund.
“It is about having the right intentions, to improve the world as well as make money, and about taking seriously the process, especially measuring social performance,” says Jed Emerson, co-author of a new book on impact investing.
A hard-nosed money-grabbing capitalist would have made more money investing in impact investments than in just about anything else over the past decade.
The industry is also held back by the limited scale of investment opportunities. Some investment firms have had trouble fulfilling its pledge to commit 10% of its private-equity allocation to impact investments. Yet, small hydro has an amazing potential.
Our innovation completely changes the picture by introducing a new way to capture energy from the height of water behind a non-power dam:
- Bypassing any disabled turbines in a power dam
- Adding helical turbines on the exterior front of the non-power dams
- Capturing the energy from the siphoned water into a tornado shaped water tower.
- Without adding any expensive civil costs
- At an unusual low cost of $0.045/kWh as compared to dam renovation costs of $0.60/kWh
In areas of the world without access to power dams, this portable small hydro solution can demand high electricity rates. It is imperative for significant capital investment activities in developing countries i.e. China and India, where people are suffering from haze and unhealthy air every year. Trillions of dollars of investment will be at stake.
Everyone wants to make an impact in this society and this can be one good way. Impact investing is “all good” and everyone should have a little in their portfolio.
It is not enough to make investors feel good about themselves; they also want to make money. Some hard-nosed financial giants have an important message about impact investing: they actually see it as profitable for themselves and their clients.
Good investors invest in the best investment. The original investment can be repackaged for a lump sum and sold to pension funds, which are constantly seeking long term secure investments. The management of the new small hydro system can continue to earn 15% on a long term basis despite the sale of the small hydro ownership.
Once this venture can make one valuable contribution, it would be to demonstrate to large players that this type of investment is doable. This adds to the market value of your original investment.
Gradually, more people more people will be tempted out of mainstream finance. From a capital gains point of view, it is important to become part of this evolution now rather than following the crowd later.
SOME IMPORTANT LINKS
- An Irrigation System: NORTHydro.com
- A Rabbit and Fish Farm: AfriCAPITALISM.us
- An Agroforestry Intercrop System: LivingWaterIs.com
- The Charitable Arm: SunnyUp.net
- God’s Loveletters: Godloveletters.com
- Thunder of Justice: ThunderofJustice.com
- Microfinance for women: LivingWaterMicroFinance.org
- Deliverance Is: DeliveranceIs.com