The other day I attended a seminar where the guest speaker, Ms. Thuli Madonsela indulged the audience about EPIC lifestyle. She mentioned that the word is an acronym which stands for Ethical, Purposeful, Impactful, and Committed. We were encouraged to adopt these principles as we go along trying to achieve our life’s goals and aspirations.
Today’s article describes what impact investing entails as this topic is gaining traction. Impact investing has related aspects and touches on several avenues. According to the Global Impact Investing Network (GIIN), impact investments are investments made with the intention to generate positive, measurable 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 on investors’ strategic goals.
The growing impact investment market provides capital to address the world’s most pressing challenges in sectors such as sustainable agriculture, renewable energy, conservation, microfinance, and affordable and accessible basic services including housing, healthcare, and education.
Let’s take a step back to unpack how we have contributed positively (or negatively) towards the challenges that we as humans (and environment) face. We all belong to one planet. It is estimated that the planet’s population is to rise from currently 7bn to 10bn by 2050. Over the years, we have accumulated severe challenges which are inter-connected. These challenges range from population growth, wealth inequality, food (in)security, ecosystem declines, deforestation, climate change, energy and fuel scarcity, water scarcity, urbanisation and many more.
Doing nothing to address these challenges has a ripple effect, whilst resolving a few issues will contribute towards a more sustainable future. Humans are known to be adaptable and whilst climate change is a challenge, we could adjust our behavior and implement workable solutions to resolve this debacle.
The 2030 Agenda for Sustainable Development, adopted by all United Nations Member States in 2015, provides a shared blueprint for peace and prosperity for people and the planet, now and into the future.
At its heart are the 17 Sustainable Development Goals (SDGs), which are an urgent call for action by all countries (developed and developing) in a global partnership. They recognize that ending poverty and other deprivations must go together with strategies that improve health and education, reduce inequality, and spur economic growth, all while tackling climate change and working to preserve our oceans and forests.
Impact investing challenges the long-held views that social and environmental issues should be addressed only by philanthropic donations, and that market investments should focus exclusively on achieving financial returns.
The impact investing market offers diverse and viable opportunities for investors to advance social and environmental solutions through investments that also produce financial returns. Many types of investors are entering the growing impact investing market.
Banks, retirement funds, financial advisors, and wealth managers can provide investment opportunities to both individual and institutional clients, with an interest in general or specific social and/or environmental causes. Institutional and family foundations can leverage significantly greater assets to advance their core social and/or environmental goals, while maintaining or growing their overall portfolios.
Our communities require asset owners and allocators of capital that appreciate their potential to create a wider impact. This would entail investing across the socially responsible investment spectrum from improving access to education and generating much-needed jobs to driving transformation and greater economic inclusion in the communities in which they live and work. This approach is EPIC and goes a long way to address the various country’s socio-economic imbalances.
Written by Sydney Sekese, CFP® professional and member of the Financial Planning Institute