So what really is Impact Investing? A short explanation ...
(This is the transript of the episode and all the links mentioned in it)
Having now interviewed almost 400 guests on Seeds Podcast a recurring theme which has emerged is how they are using impact investing to effect positive change in our society. A question I get all the time though - both from companies, charities, directors and Trustees is - what exactly are you meaning when you keep talking about the rise of Impact Investing?
So let's break it down and give you some further listening if it does interest you.
First the traditional approach. Someone has a spare $10 million dollars - now this is a hypothetical scenario rather than being my situation. Anyway, they have a choice about where they put that money. One option is a traditional approach which means they put it into a long term deposit which makes interest. They get some financial return, even if it is relatively low, and the offshore owned banks recycle that money to make themselves a nice profit.
Impact investing steps in at this point and offers another approach. What if that person has a particular cause that they care about - unfortunately the list is long - social housing, food deprivation for children, education on mental health and suicide prevention, climate change and green tech - there are many needs. Let's choose social housing because I know it really well.
So what if our friend took a portion of that $10 million and invested it into a startup company that wanted to provide social housing - this could be as equity and result in owning shares, or it could be as debt and they would have a loan they make. The crux of the difference with traditional investing is that they would be able to make a financial return because it is not a donation, it is an investment. But at the same time they would be able to have impact which is far greater and more satisfying than the interest they make from that long term deposit.
I am not saying they invest the full $10 million they have, but they do invest a portion of it - doing so may involve some risk but often ethically motivated companies that provide real solutions to our most wicked problems perform better, not worse, than traditional investments - and a tsunami of consumer support for such initiatives is on its way as people consider the supply chain and where their products come from.
