Impact investments are investments in companies, organizations or mutual funds with the intention of generating social and environmental impacts, in parallel to financial return.
With an intention to invest 19% more in 2014 than in 2013 (source: The Impact Investor Survey 2014 GIIN - The Global Impact Investing Network), impact investors have an important role in providing capital to targeted sustainable development solutions. Although the biggest impact investors are in North America and Europe, 70% of capital is allocated in developing countries. On the other hand, well-structured investment impact opportunities are rare and have drawn the attention of the financial industry for its low environmental risk and reputational benefits.
According to GIIN - The Global Impact Investing Network, Impact investments have 4 characteristics:
- Intent: Investors have the intention and focus set the desired environmental impact.
- Reimbursement: Expected investments should return at least the capital invested.
- Expectations of return on capital: investments generate returns ranging from "Below Market" to "Cost Market risk-adjusted".
- Measurable impacts: environmental impacts are measured and reported, providing transparency to the shareholders of the investment.
Impact investment process
In order to align intention and result (impact) the very first step is to set targets, which will guide the definition of the next steps: project aquisition and assessment. Targets must be revised periodically though as the problems the fund aim at solving also change. Targets can be brokendown into indicators, which will be the backbone of the fund enrollment form or any other kind of document for the investees.
EKOS BRAZIL supports organizations in structuring and operating financial products with high positive environmental impact, like Itaú Ecomudança Funds (Itaú Ecomudança). Via its large network of environmental projects, Ekos Brazil support organizations during the aquisition. Moreover, Ekos Brasil has a sofisticated framework to measure and compare environmental and social impact within different project ideas, allowing the selection of projects that maximize impact versus risk.