Impact Investing - Making Money And Doing Good
More and more green businesses turn out to be a huge success these days, it is proven that making money and ‘doing good’ are not mutually exclusive.
While profit is still the ultimate objective, investors now have the opportunity and alternative to achieve beyond just monetary benefits.
Early Stage Impact Investing
Whenever there is a gap in the market, there is a business opportunity. As the world is getting increasingly more aware of the importance and need of sustainable business and consumer behaviour, opportunities are created for entrepreneurs and business owners.
Towards the businesses that support the betterment of the environment and society, investors
are very interested. Instead of making money from putting money in a business that will eventually destroy planet earth, investors are more likely to place their bets on businesses that focus not only on the profit but also on sustainability in terms of the environment and the business structure. And this is impact investment. Impact investing by definition is investment in for-profit businesses that have the specific objective of creating positive social and environmental impact.
“The impact investing market is in its nascent stage and is growing. However, a clear ecosystem is not yet defined and therefore there is room for new entrants and new practices. In our view, impact values will and should be integrated over time into all early stage investments, therefore EBAN as the trade association for early stage investors will support its growth, formalisation and integration into this asset class.” - European Business Angels Networks ('EBAN') White Paper June 2011
In Malaysia, the Sustainable Consumption and Production trend is picking up traction and there will be many business opportunities for entrepreneurs. The EU-Malaysia Chamber of Commerce and Industry has recently held the EU-Malaysia Trade & Investment Forum 2014. In this forum, many angel investors have expressed their interests in investing in green businesses as impact investing is more attractive to them.
Difference between impact investing and traditional investing
Based on Impact Investments an emerging asset class, JPMorgan Global Research, 2010, some of the key characteristics of impact investment are capital may take the form of equity, convertible debt or debt, impact may be delivered through how the business is run and the return of impact investments can range from producing a return of principal capital to offering market-rate or even market-beating financial returns.
The key difference between traditional early stage investing and early stage impact investing is that they have a very different triple bottom line. For the former, the triple bottom line is profit, profit and profit; for the latter, its focus is on people, planet and profit.
And so the time has come for the entrepreneurs to think people, planet and profit when generating an idea.