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Sustainability’s Triple Bottom Line
What are your project’s social, environmental and economic impacts?
Impact investments create positive impact beyond financial return. The Global Impact Investment Network (GIIN) defines that as “the intention to generate 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 upon the circumstances.
Projects and ventures made possible through impact investments often address “the world’s most pressing challenges in sectors such as sustainable agriculture, clean technology, microfinance, and affordable and accessible basic services including housing, healthcare, and education.” Access to basic services are seen as part of human rights, environmental and social justice, where impact capital now finds talented entrepreneurs solving these pressing issues:
- energy security, food security, water security … climate change (which affects the poor disproportionately to the more wealthy)
- helping people escape poverty traps, building toward local self-reliance
- improved quality of life and living conditions (such as clean indoor lights) delivering healthier places to live or work.
In short, impact investments grow regional economies, strengthen trade partners, create jobs and change lives. This is similar to, and sometimes also called sustainable development, from the “social capital” side, social entrepreneurship, or even ethical/responsible investing. At In3, we have a bias toward private-sector, for-profit and entrepreneurial solutions, as they create scale generally not possible through government incentives, humanitarian aid or philanthropy, or the non-governmental service sector, which have their place, too, especially in the face of crises and dislocations.
We can credit pioneer Jed Emerson for coining the apt phrase “blended value.” Impact investing delivers sustainable value in social, environmental and financial dividends. Often the environmental piece is not a cost but an advantage, as we are seeing in projects that convert waste, use resources more wisely, or design as nature would to not produce waste in the first place.
Also proving successful in recent year are public-private partnerships aimed at these same developmental goals, such as building infrastructure, capacity, new opportunities for education and advancement, delivering clean water, energy and healthy food, levelizing the true cost of energy, enabling access to capital, and other basic services.
Isn’t Impact Investing just SRI by another name?
Some would credit the roots of modern impact investing with Socially Responsible Investing, or SRI. The main distinction is that SRI tends to focus on screening out bad actors from portfolios of public equities as exchange-traded mutual funds, or combine public stocks with bonds or other asset classes in a myriad of instruments managed by professionals.
Not every worthwhile project or venture delivers triple-bottom-line benefits, but one of our core principles, shared by a growing number of individuals, organizations and institutions worldwide, is turning liabilities into assets. Turning waste and other problems into resources. This is not only extremely profitable, but upholds principles of responsible investing.
Some industries transform the entire value chain is ethical. Rather than focusing narrowly on financial returns “at any cost,” In3 Group and our partners give preference to projects and ventures that uphold these impact investing principles. Investments for a greater purpose than just making money.
The business case for delivering social and environmental impacts translates to better financial performance in the long run, with upside advantages (markets aligned with these principals, hungry for solutions) and fewer downstream problems (from regulations favoring cleaner approaches to unsustainable ecosystems), thus leading to more priority attention by In3 and our partners, better loan rates, lower fees, and faster processing.
Some investment banking services and funds are agnostic about the greater impacts — positive or negative — that their clients have. Not us.
At In3, we catalyze, facilitate and help realize impact investments in emerging markets and developing economies where the most benefits can be derived.
Impact investing, along with sustainable development’s “triple bottom line” investing, or “social investing,” is also a priority for our main lenders and equity partners. (More on impact funding)
What is a “sustainable” approach to international development?
Social ventures and impact projects often focus on underserved or emerging markets in developing economies. A sustainable approach to international development is one which takes account economic, social and environmental factors, and where results are not dependent on finite resources. Something which is sustainable will not use more natural resources than the local environment can supply; more financial resources than the local community and markets can sustain; will not produce wastes with “no place to go” (toxins that accumulate and persist); and will have the necessary support from customers, the community, government and other stakeholders to carry on indefinitely.
Trade partners or cooperative agreements, such as those with host governments, loan guarantee programs, finance facilities, etc., help ensure the project will be supported (or at least allowed) where sustainable solutions are needed most.
Further Reading & Resources
Confronting the 4 Myths of Impact Investing, by Jean Case, CEO of Case Foundation, June 8, 2016.
How Impact Investors Evaluate what Ventures to Fund, from Devex, June 8, 2016
Article (by In3 founder Daniel Robin):
“Impact Investing for Sustainability — the emerging opportunity“
Or, download printable PDF version
Principles of Responsible Investing (PRI), a partnership of UNEP Finance Initiative and UN Global Compact, Progress Report for 2010
Investing for Social & Environmental Impact — a design for catalyzing an emerging industry (download 86-page PDF), by Monitor Institute, with lead funding from Rockefeller Foundation (2009).
United Nations Framework Convention on Climate Change (reference list of multilateral and bilateral development funding sources)
- Highlights of 2017 “Climate Reckoning” at Harvard University
- Workshop: Social & Environmental Aspects of Fundraising at “Climate Reckoning” Conference (Harvard)
- Water, Soil, Heat and Carbon — the shift hits the fan
- Impact Investing reaching mainstream acceptance — will it outpace financial-only returns?
- Panel Discussion: food, water and climate change mitigation