Impact Investing: doing well by doing good
27 August 19
27 August 19
An increasing number of people are recognizing that their money should do more than just make a financial return. Their investments can, and should, also aim to drive meaningful, sustainable social and environmental impact. Today interest in impact investing is experiencing explosive growth as the concept continues to seize the attention of mainstream investors across the world economy.
In the most rigorous sizing of the market to date, the Global Impact Investing Network “GIIN” found that over 1340 organisations currently manage over $502bn in impact investing assets worldwide. What’s more, over 50% of active impact investing organizations made their first investment only within the last decade.
Understanding changing investor attitudes is a key factor for any adviser that wants to capitalise on this growing trend for socially responsible investing. The shift to impact investment offers a number of opportunities as well as the prospect of taking a key role in an investment approach that will increasingly be seen as standard.
However, as appetite and momentum for impact investing continues to grow, there is an increased demand for determining which sectors and businesses offer the best returns and social impact. The issue is there is no rulebook investors can buy that tells them how to do it. With the abundance of choice comes a greater degree of confusion.
At Triple Point, we believe there are four key areas that investors can look at that marry capital growth with positive social impact. The Triple Point Impact EIS invests in companies that make a significant positive contribution to one of four social themes, with each investor holding a portfolio of 8 to 12 companies. In this article, we explore these four key areas, which include, Healthcare, Environment, Children and Young People, and Inequality.
Healthcare represents a brilliant opportunity for impact investors to generate both strong financial and social returns. Medical technology is set to grow globally at 5.6% per year reaching $595 billion by 2024 according to analysis from Evaluate Ltd. This emergence can enable personalised medical technology to play a crucial role in transforming the lives of patients.
So far, Impact allocations to healthcare have experienced a 15% compound annual growth rate (CAGR) over the past five years, according to GIIN. At a time where the deployment of private capital is pivotal to the growth of ‘MedTech’ solutions, healthcare presents a clear opportunity for impact investors to generate strong, long-term returns, and truly make a difference to those most vulnerable.
The impact of climate change has unlocked numerous opportunities for companies to offer alternative or sustainable solutions. Companies are facing increasing calls to be more accountable for their environmental footprint making investing in environmentally responsible companies more attractive as they are more in tune with the forces and attitudes shaping the global economy.
For example, NatureMetrics Ltd (”NM”), is a firm which provides unique Environmental DNA testing to monitor biodiversity in threatened areas of the globe. Their goal is to mitigate and manage the environmental impact of large-scale international infrastructure projects by transforming the efficiency and accuracy of biodiversity surveys which underpin Environmental Impact Assessments (EIAs). In June 2019, the Triple Point Impact EIS Service deployed funds into NatureMetrics to help expand the international representation of the firm. NatureMetrics is one example of the fantastic pool of innovative companies currently providing solutions to global environmental problems.
Impact investors are also funding projects that aim to support the growth and advancement of children and young people. The UN Sustainable Development Goals aim to improve and expand access to better education and services for children and young people, in order to tackle unemployment, address skill shortages and provide fair opportunities for all.
To help meet these goals, one company within our growing EIS portfolio, MWS Technology, is transforming the efficiency and compliance of organisations that deliver apprenticeship training to young people. Through its platform, ‘Aptem’, it helps providers manage programmes directed at young people who have a vocational training need or who may not have had prior educational or parental support.
Private investment is also an increasingly powerful tool in reducing global inequality. Some funds are focused on closing the gap between men and women in business. Gender lens advocates argue there is also a clear link between companies with diverse workforces and strong financial returns. Several studies from the Peterson Institute and Ernst & Young have found bringing more women into higher management boosts profitability - making it an opportunity worth up to $28tn. The G7 2X Challenge, for example, is a commitment by development banks within the world’s biggest economies to invest $3bn in projects aimed at women by 2020, while the Billion Dollar Fund, a consortium of finance groups, is halfway to reaching its $1bn capital-raising target.
Ultimately, the scope for impact investing goes well beyond these four sectors – but they form a useful lens to focus on impact investing.
The Triple Point Impact EIS Service is part of the expanding global market opportunity known as impact investing. The service targets significant capital growth by investing in fast-growing, innovative companies that have a positive impact on society.
If you want to find out more about our service and our upcoming deal flow, join us for the Impact EIS Webinar Thursday 05 September at 12 pm. Click this link to register today.
Risk Warning: The Triple Point Impact EIS Service carries all the risks of investment in smaller companies and places investor’s capital at risk. There is no guarantee that target returns will be achieved, and investors may get back less than they invested. Past performance is not an indication of future performance. Tax rules and reliefs depend on individual circumstances and are subject to change.