Every year we celebrate Earth Day posting- shouting on top of social media to save mother earth, protect the environment, restore damaged ecosystems, and live more sustainably. And all this goes in vain the very next day, looks like it was just your another stunt to grab a few followers… well congrats!
Folks who genuinely believe in driving the future and making an impact may choose startups on Pepcorns and invest in them which go with your mission statements or ideas that really resonate with you. You can invest in green tech, women-led startups, and so much more. Of course, as an investor, your primary motivation is making a profit, but you can select the types of companies you want in your portfolio and pick those that match the subjects you are passionate about.
Impact investment grabbed a lot of attention recently as world leaders promised to take initiative to cut or at least reduce carbon footprint. To better understand the term Impact investing, you may take it as an investment that is motivated by social responsibility as well as profit; investing that’s expressly for a prosocial purpose(intended to help others).
That purpose can cover a wide range of sectors, from green technology to social rights, public welfare solutions, and more. In other words, impact investing is a way to make a difference, your step towards a better future, a better world(while making a fortune in the process).
What Is Impact Investing?
The term “impact investing” was invented in 2007 by financial and philanthropic leaders at the Rockefeller Foundation’s Bellagio Center, a think tank that exists to promote the good of humankind. Since then, the Global Impact Investing Network (GIIN) has more clearly defined impact investing as investments that have the following characteristics:
- Intentionality: This is the heart of impact investing and what sets it apart from other types of investing. It is defined by its focus on contributing to measurable social or environmental benefits.
- Use Evidence and Impact Data in Investment Design: Impact investments are based on evidence and data that support the investment contributing to social or environmental benefits.
- Manage Impact Performance: With the intentionality mentioned above, impact investments need to be managed and the performance of the investment (how impactful it is) tracked and measured. That performance should be relayed back to the investors.
- Contribute to the Growth of the Industry: Impact investors share learnings with each other to find what types of impact investing actually provide value and contribute to social and environmental benefits.
How Fast Is It Growing?
GIIN reports that in 2020, over 1,720 organizations are managing over $715B worth of assets under management in the impact investing space. GIIN also reports that impact investing has shown growth in both sophistication and depth over time and that most organizations participating in impact investment today believe the space is growing steadily.
Why is impact investing becoming more popular? Among other factors, a generational shift in investing attitudes may be responsible for this increase. Millennials are a socially conscious generation, as evidenced by a 2018 Spectrem Group Research Report, which said that “more than half of Millennial investors (52%) see the social responsibility of their investments as important selection criteria”. Today’s generation of new investors are thinking about how their investments impact more than their earnings, but the world at large. We saw the same with EV manufacturers and the sustainable energy market, and it’s still just getting started.
While traditional investments can have some social benefits, such as promoting economic growth and support of business, it’s not the primary focus of your average ETF, for example. By focusing on impact investing and leveraging different types of investment platforms, like ours, you can focus your investments on opportunities with an explicit social or environmental purpose.
Is Impact Investing Profitable for Investors?
Some skepticism of impact investment is perhaps understandable. It sounds good on paper to do social good while also making money at the same time — who could disagree with that? But is it too good to be true? Can investors actually make money through impact investing?
In fact, McKinsey says it’s a “myth” that impact investing isn’t profitable. Looking at the success of impact investing in India, McKinsey reports that: “58 percent of the [impact investment] deals either met or exceeded the average expected market rate of about 7 percent…the top one-third of deals yielded a median [Internal Rate of Return] of 34 percent, clearly indicating that it is possible to achieve profitable exits in social enterprises.”
This is not to say that impact investment is a surefire way to see a return on your investment. There is always a risk, and particularly when it comes to investing in startups, that risk is high, and most startups will ultimately fail. However, McKinsey’s report does reinforce the idea that you can make money via impact investing, and the possible returns you could see are not categorically different from what you might see via a more traditional approach.
Interested in Becoming an Impact Investor?
Maybe you’re now convinced that impact investing is a good thing and something you want to explore. How can you participate? You may choose your purpose and start digging in startups on Pepcorns. Investment opportunities that meet your interest, whether it’s green energy, cleantech, healthcare, and more.
Definitely what you just read is clearly a few points like how you can put your money for a better future but the opportunities are immense. You may relate to anything that you feel is important to the Earth and needs to be fixed and as you come across such business, grab it.
While we believe women-led startups need to be made mainstream for gender equality, you may support the same on Pepcorns that’s a good start.
At Pepcorns, we pride ourselves on helping Indian Startups from all different backgrounds, and you can interact with those founders and ask them questions directly on their campaign and start a dialogue to learn more about the company. Head over to Pepcorns to explore our investment opportunities and see how you can make an impact today.