We have all heard about impact investing by now. Why are so many famous investors and entrepreneurs diving into it? And what is impact investing actually about?
Impact investing is the fastest-growing investment category in private markets. Unlike ESG in public markets, it’s not just about avoiding harm. It’s about actively generating positive outcomes alongside financial returns.
In a world facing unprecedented global challenges, this can be game-changing. At Top Tier Impact, we see companies addressing impossible challenges – from detecting wildfires before they even spread, to making cement sustainable.
The thing is that there are giant markets waiting to be unlocked by solving these issues. Making our planet sustainable is the quest of our century. It’s big business too. In this article, we’ll explore how impact investing is set to become mainstream investing quicker than any of us could expect.
Impact investing covers the biggest investment opportunities of this decade and beyond
Impact investing tackles the big issues of our time, from scaling renewable energy to making quality healthcare accessible for all. The way we define “impact” inside the global TTI community is as a global paradigm shift towards sustainability and equality, across all economic sectors.
That means it’s not just the sustainable part of the food or fashion industries, it’s about shifting those entire industries towards sustainability.
There are massive regulatory changes pushing in this direction. The Task Force on Climate-Related Financial Disclosures (TCFD) implements a framework for public companies to disclose their climate-related risks and opportunities. First, it became mandatory in the UK.
G7 countries are now following suit, alongside Singapore and Switzerland among others. There’s more to come in relation not just to climate, but also to nature and water.
Let’s not forget about other acts too, such as the EU sustainable finance disclosure regulation. It happens to be the biggest piece of EU legislation since the Second World War.
As Larry Fink, the founder and CEO of BlackRock, the world’s largest asset manager, has said in multiple statements, “Sustainability is the biggest corporate transition taking place in history”.
Impact investing focuses on enabling utopia, not avoiding dystopia
Impact investing is where growth and future-focused innovation are at. That’s because it has a positive focus on creating a better world. As an example, take the waste management industry, overall, it’s been growing at low-single-digit figures for the past 10 years.
When it comes to AI-driven waste robotics companies, which enable us to redeploy waste and recycle more efficiently, growth is in double digits.
When you look at it, you realize that it unlocks a lot of value.
Companies using such technology can reduce their costs and tap into new revenue opportunities. After all, waste doesn’t actually exist. It’s simply materials that aren’t in the right place. When they are, things change positively for everybody involved – companies, consumers and our planet.
Also read: Why is impact investing suddenly so hot?
Impact investing is where the brightest and most ambitious minds are at
When I graduated from Oxford University, the buzz was all about tech and startups instead of banks and finance. Today, I’m on the advisory board of my Oxford degree and I notice that the most ambitious graduates all want to make a positive impact on the planet.
They are well aware of the issues we are facing. They studied the problems and are thinking about the solutions. For them, the purpose is not an added career bonus.
Purpose has to be embedded at the core of a company’s actions, philosophy and structure. They are also naturally good at distinguishing greenwashing from a real commitment to impact.
Impact investing enables a planet where our species actually survives and thrives
When you dive into the numbers and science behind what we are currently facing, you understand that climate change, biodiversity loss and other trends aren’t just something ‘nice to avoid.’ You grasp the systemic implications for the survival of our species.
We haven’t been around that long on this planet and we are very delicate. When dinosaurs walked on earth, the levels of CO2 in the atmosphere were orders of magnitude higher than today.
It would have been impossible for us to cope with it. By accelerating changes in our biosphere, we’re not killing the earth, we’re killing ourselves, as we are way less resilient than this planet.
Impact investing is what both Millennials and Gen-Z are all about
Impact investing is part of a macro shift that is already underway. Generational shifts like this are huge and it’s not a question of if, just when.
This is where the opportunity lies for us all: by proactively embracing impact, we can help make a positive difference sooner rather than later and we align with where the world is naturally going anyway.
Personally, I feel a connection to future generations. You can call it responsibility or simply recognizing that we are all on the same big rock together, floating in a universe we still have no clue about. This might sound daunting, but it’s also very beautiful. Showing up with care, compassion and commitment is something that we owe to each other and to ourselves too.
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