The amount of money going towards impact investments is on the rise. While impact investing funds have amassed more than $70 billion in assets under management.
It is still a far cry from the trillions of dollars held in traditional investments. Amid the tremendous growth experienced in recent years, impact investing services still have a lot to do to take the burgeoning investing segment mainstream.
For impact investing to go mainstream, several things must come into play.
Transparency and Accountability
Transparency and accountability have been the biggest bottlenecks that have slowed impact investing transition into the mainstream investment world. Impact investing services and impact investing funds will have to be more transparent on the insights, investment options, and data they offer to attract the much-needed capital needed to accelerate the transition.
Accountability on the investments made, clearly showing the risks and returns, must also come into play if would-be impact investors on the fence join the fray.
According to The Altruist League’s Managing Partner Ekaterina Chernova, “transparency and accountability will make the space more attractive conversely attract more investors. People want to know what they are investing in, the risks involved, the investment’s long-term impact, as well as expected returns.”
Impact investing funds must place measurable social and environmental impact at the center of investment decision making to enhance impact investment credibility compared to traditional investments.
Policy measures by governments also have a role to play in taking impact investing mainstream. Governments can create an enabling policy environment that will go a long way in encouraging investors to pursue sustainable investors.
A tax incentive is one of the policy measures that could entice private investors to pursue impact investments. An increase in Institutional investors ‘ eyeing impact investment returnswould be crucial in accelerating the transition from margin to mainstream.
Governments could partner impact investing services and work towards bringing greater transparency on impact investments’ impact. Such advances could entice impact investors and philanthropists, conversely, attract more funds to space.
Clear cut Definitions
For the longest time, impact investments have been shrouded in mystery given the lack of clear-cut definition. The fact that impact investing does not mean the same thing to all people has been one of the biggest impediments in pushing to take the investment trend mainstream.
Some people see impact investments as an investment play for trying to replicate financial benchmarks performance as most of them are geared towards unmet ESG issue which present profitable investment opportunities. However, some see them as a way of accepting lower financial returns for the sake of addressing ESG issues.
Impact investing funds need to clarify their intentions and tradeoffs if they are to attract the much need capital from impact investors. Likewise, impact investing services, and other entities need to be more objective about the levels of risks involved and expected returns, as is the case with mainstream investments.
“A mature impact investing market ready to go mainstream will need shared standards for measuring impact. Similarly, there needs to be a common language for profiling impact funds,” said, Milos Maricic, The Altruist League’s President.
Launching platforms that pools together investors from all walks of life and educating them on the precepts of impact investing should also go a long way in enhancing its popularity. Connecting the right people is the first step to strengthening impact investing, crucial to take it mainstream.
Such platforms will connect innovators, entrepreneurs, and investors worldwide to share ideas on various impact investment ideas. Technological innovation in the form of such platforms has the potential to advance the cause of impact investing. Such applications could act as the real equalizer conversely sparks inclusivity needed to pool investors searching for impact investing returns.
A mature impact investing sector ready to go mainstream will need an array of specialized and readily available products. As mutual funds and ETFs concentrate on industries, geographies, and asset classes, so will impact investing funds need to specialize in targeted offerings to target a specific niche of investors?
Settling on distinct social and environmental themes makes it easier to set goals on impact investing returns and plans that impact investing funds can achieve.