eBusiness Weekly
Kumbulani Masayila
The Rockafella Foundation first coined the phrase Impact Investing in 2008. Although it has only started to grow rapidly in recognition, it has been in existence for a long time in various forms. We will talk about the history of Impact Investing in future columns. But perhaps many people have heard the term Impact Investing and wondered what exactly it is? In basic terms impact investing is the mobilisation of finance to address social and environmental problems while generating profit.
It brings the world of finance and development together. For a long time, the investors thought that delivering a financial return while doing good was not possible. Today Impact Investing is expanding as a promising tool for both investors and philanthropists.
As the problems faced by humanity today become more complex and entrenched, an approach that brings everyone to the table from governments, investors, and philanthropists is needed. In Zimbabwe the effects of Covid 19, climate change induced drought, food insecurity, and many others challenges require finance to come up with strategies to respond to these emerging demands.
A broad definition of impact investments; investments made in companies, organisations and funds with the intention to generate social and environmental impact alongside a financial return. While this includes a broad set of investments that we will touch on in later articles, three or four elements should come out. On April 3, 2019 the Global Impact Investing network published the core characteristics of impact investing, which complement impact investing definition and aim to provide even further clarity about how to approach the concept.
- Intentionality
- Measurements
- Financial Return
- Range of return expectations and asset classes
When it comes to investing these days, individuals have a multitude of options to choose from and a myriad of ways to implement their desired investments. As part of those options, the rise of impact investment has created some fundamental changes to how investors vary their asset portfolios. Assessments of a cooperation’s performance on environmental, social and governance (ESG) criteria have made it easier than ever for investors to align their personal values with their investment portfolios and many have chosen to do so.
Now individuals can avoid those areas that directly conflicts with their values. In future columns we will talk about how to develop an impact investment strategy.
In impact investing, investors can target a range of return from below market to market and above market. The international Finance Cooperation (IFC) which coined the term ‘emerging markets’ in the early 1980s has proven that generating impact investments does not necessarily require sacrificing return, achieving an internal rate of return 18.3 on its investments funds portfolio between 2000 and 2011.
Social enterprises: A hybrid spectrum. Source adapted from J. Kingston Venturesome, CAF Venturesome, and European Venture Philanthropy Association (2015).
The growing impact investing market provides capital to address the world’s most pressing challenges in sectors such as sustainable agriculture, clean technologies, micro-finance and affordable and accessible basic services including housing, health-care, and education.
It presents an opportunity for solving most of the challenges faced by developing countries and emerging economies like Zimbabwe and the rest of the developing world if taped into and unlocked.
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 market. While time and space does not allow to give a list of investor motivations here and give examples of people making impact investments, we hope we will be able to do that in the future.
Kumbulani Masayila is a 2014 Graduate of Stanford Graduate School of Business Ignite Global Innovation Programme in New York City, USA. He has also trained in Economics at Stanford University Woods Institute for the Environment in California, USA and completed training in Project Management. He graduated from Midlands State University, Zimbabwe, in 2005 and seeks to champion Impact Investing in Zimbabwe by raising awareness, teaching and sharing knowledge with your audience. Is reachable on +263719407022.
