When most people hear the term “impact investing”, they often don’t know what you’re talking about. They might know that it involves investing in socially and environmentally conscious businesses, but may not be aware that impact investors make money, and are looking for a financial return. Along with social impact, impact investors are looking for financially sustainable companies that can pay back a loan or are profitable enough for them to make an exit in the future.
Around the world, social impact investing is gaining traction. ESG investing has grown by 60%; social impact bonds now exist around the world; and impact investing fund managers are investing in more deals, with more success.
Usually, for most people, the words interest rate, loan, or investment don't come up within the first 5 minutes of a first date. If they do, you could be in for a bit of a boring evening (unless of course, you're on a date with Warren Buffet).
We thought it would be nice to start this post off with some good news. Slowly but surely we’re seeing more and more banks telling us how important it is for them to invest our savings responsibly. And not just the usual suspects like Triodos. Large banks like ABN AMRO, ING and Rabobank feel urged to work on their corporate image.
There were times when it was easy to draw a line between left-wing and right-wing stances. Nowadays, the division is not as clear. Geert Wilders, for example, wants fewer Moroccans in the Netherlands, but at the same time he wants to make health insurance cheaper for people who can barely afford it. And what about the left-wing; does it still consist of hard working laborers or is it now owned by the new deep-pocketed elite?
Investments in sustainable initiatives will continue to increase in the coming years. This is evident from a large study by Schroders Investment Managers. In their Global Investor Study 2017, they did a survey with more than 20,000 active investors from 30 countries in all parts of the world about the sustainability of their investments. People from Australia, Brazil and the USA, but also from Germany, Italy and the Netherlands.
This article is about the absolute necessity of a broader vision when investing. A form of investing that not only takes into account financial returns, but also social returns. For example, the impact on the environment and humanity.
There are various ways to combine crowdfunding and sustainability. Besides the many alternatives in The Netherlands there are other companies which focus on creating worldwide impact from the Netherlands. Improving sustainability and decreasing environmental impact is a global cause after all.
The Lendahand Blog revolves around the topic of "Social Impact Investing" via Crowdfunding. But what exactly is the "Social Impact" within impact investing?
Everyone who partakes in crowdfunding is looking for ways to minimize the risks associated with crowdfunding. But how do you do this? In what way can you influence the risks of making a bad investment?
Crowdfunding is a timeless concept and originates from the market of books and publications. Back then, books were only written and published if there was a sufficient amount of subscriptions that indicated a certain level of interest for that subject. This way, writing a book was ensured to be at least a bit profitable.
With crowdfunding, it is very easy to contribute to the global fight against poverty. In order to reach this, creating jobs is considered the most important instrument. For instance, you can provide a new entrepreneur with a small loan through crowdfunding easily, so he is able to start building a life for himself and his family.
At Lendahand, people can invest in our local partners (banks and non-banking financial institutions) or directly to entrepreneurs through crowdfunding. These investments have interest rates of approximately 2.5 to 8 percent annually. As you can see, this is quite a difference. The higher the interest, the higher the price that needs to be paid. But the price of what, exactly?
It seems like these days everyone is obsessed with jobs. No matter where you turn, what newspaper you read, news program you watch, you will hear supposed experts talking about jobs.
Social impact investing works by connecting investors with entrepreneurs and companies that are making a positive difference in the world and are in need of additional funding to grow and expand operations.
Recently I asked the following question in the office: assume you are really strong, you tear a phonebook in half and stack the two halves on top of each other. You tear the stack and put the new parts on top of each other again. Once more, you tear and stack. You get the idea. Now the question was: how many times should you repeat this process in order to be able to jump off the stack onto the moon? My colleague’s answers ranged from 5,000 to 1,000,000 times. Before reading on, how many times do you think you would need to tear and stack the phonebook?
Social impact investing can provide a range of returns, depending on the type of investment. Some online platforms offer equity-based investments and some operate on a lending based model, but these models can vary depending upon the types of businesses they work with.
Social Impact Investing came about in 2007, and can be defined as "investments made in companies, organizations, and funds with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return."