At Alpen Partners, we are dedicated to helping our clients find the best kind of investment for their particular need. With that, many are looking to not only make a profit when it comes to their investment, but also make a social change at the same time. This kind of investment is called impact investing.
What this means is that investors are seeking companies to invest in that take strides towards making a social impact, whether it be environmental action, better education, homelessness, etc. Coined in 2007, impact investing is becoming increasingly popular as millennials are getting to the age of exploring the world of investing. The market for impact capital is currently sized at $60 billion and has the potential to grow over the next decade to $2 trillion, which is 1% of global invested assets.
Impact investing ranges from investing in health technologies to helping create affordable housing. With the help of investors like you, things like renewable energy and clean water can become a reality.
Though this type of investment is growing, it’s still new, so many don’t fully understand what it means. There are similar words thrown around all the time, like social investing, ethical investing, and more. What does it all really amount to? Isn’t it all the same? We’re here to tell you it’s not.
Before jumping into just any kind of investment that claims to help others, it’s important to fully understand the vocabulary. In the world of impact investment, there is a whole subset of investments. You may also need to think about how you choose a company to invest in. Is there a set of standards to follow when choosing a company that aligns with your standards of social impact? Thankfully, the following vocabulary lesson may help you out.
Let’s dig into the wide world of impact investing. When looking at the list, note how each kind of investment strategy involves making a social or environmental change. What fluctuates, however, is how an individual can choose a company to make the change they want to see in the world.
This is the umbrella term used to describe the type of investing with both economic and social or environmental goals in mind. Similar terminology includes ethical investing, sustainable and responsible investing, impact investing, and social enterprise investing.
This word can be easily interchanged with other blanket terms like green, clean, or socially conscious investing.
Sustainable and Responsible Investing
Also known as SRIs, sustainable and responsible investments are a type of investment that chooses a company for investment through a set of environmental, social, and corporate governances.
The process of choosing a company consists of eliminating those that produce harmful substances, such as tobacco, or engage in harmful activities such as polluting. SRIs, however, don’t actively look for companies that are doing positive things. They are mostly concerned with not making a negative impact.
Impact investing picks up where SRIs leave off. In impact investing, you are looking for companies that have made the efforts to make a positive impact on a social and/or environmental issue. This allows the investors to align their personal values with the investment being made.
The reason impact investing is different than SRIs is that the impact on the world is intentional. These kinds of investors are actively seeking to make a positive impact using a financial mechanism. They require proof from the companies that the positive impacts are being made.
Examples of impact investing include renewable energy and sustainable agriculture.
When an individual’s personal beliefs and values play a vital role in the investments being made, it is considered ethical investing. This makes it easy for those with strong beliefs to make a decision to benefit a specific cause or movement. An example would be a person not wanting to invest in a company that manufactures firearms.
Triple Bottom Line Investing
Triple Bottom Line (TBL) investing adheres to “The Three Pillars” before making an investment decision. Also known as “3BL” or “People, Planet, Profit,” TBL sticks to reported practices.
The framework allows businesses to report on three different performances; social, environmental, and financial. The goal is to measure a company’s sustainability by requiring it to report on its impact on the world as well as the profitability to shareholders.
Currently, there are no universal standards for measuring any of these factors, so companies are free to use their own method of calculations, though more and more companies are choosing standardized measuring tools such as the Global Reporting Initiative.
Where We Come In
If any of this confuses you, or you’re having trouble deciphering what makes each one different, let Alpen Partners help you out. By choosing impact investing, you will be part of a movement that combats the idea that only philanthropic donations can make an impact on social and environmental issues. It also fights the stigma that market investments should only focus on financial gain.
Responding to the challenges of our generation, Alpen Partners is launching a practice focusing on impact investing. Sustainable investments have become a major theme for global investors, and our firm wants to be at the forefront of creating alternatives for our clients to have their investments reflect their values.
Partnering with a leading specialist in the sustainable investments space, Alpen Partners will start offering portfolios that are focused on the best long-term sustainable investments that are equally dedicated to seeking solutions to some of the issues we face today. While maintaining our focus on balance sheet quality and capital efficiency, the portfolios will consist of companies and organizations that have the intent to generate a measurable, beneficial, social, and environmental impact alongside their strong financial return. Through impact investing, with the help of Alpen Partners, you can make the change you want to see in the world while also increasing the change in your pocket.