Why is Impact Investing Important?

27th Mar 2024

Why is Impact Investing Important?

Why is Impact Investing Important?

Our relationship with money extends beyond its impact on our individual lives. The decisions we make regarding our finances not only shape our personal journeys but also have the power to mould the world we leave behind. In the world of finance, impact investing has become the buzzword of the decade.

Investors, big and small, are eager to channel their funds into projects that promise to make a meaningful difference in society. According to a report released by Allied Market Research, the global impact investing market accumulated $2.5 trillion in 2021 and is projected to reach $6.0 trillion by 2031, demonstrating a compound annual growth rate (CAGR) of 9.5% from 2022 to 2031. This mindful approach to financial decisions contributes to creating a brighter and more sustainable future while earning a profit.

For a significant duration, impact investing, much like Private Equity (PE) and Venture Capital (VC), has been reserved for a select few. Most funds have a standard minimum of $500k and above, typically with a long-time investment horizon. Some funds require higher entry levels. At its core, VC and PE represent long-term investments in privately held, unlisted companies. This distinction sets them apart from publicly traded stocks, enabling investors to be part of the growth journey from an early stage. In exchange for funding, VC and PE funds acquire equity stakes in these businesses, forging partnerships with management teams to nurture expansion and drive enhancements that boost the company’s value.

VC primarily targets startups and emerging businesses brimming with innovation and potential. It’s akin to planting seeds in the hope of reaping a bountiful harvest. On the other hand, PE zeroes in on established companies with growth prospects and the potential to be reinvigorated. The global venture capital investment market has shown a remarkable trajectory, with its size reaching an impressive US$233.9 billion in 2022. This meteoric rise underscores the growing appetite for high-risk, high-reward investments, and projections indicate that the market is poised to reach a staggering US$708.6 billion by 2028.

The positive news is that it is now possible for individual investors to make an impact and earn a profit with investments at a modest US$35k. Startup companies that promise to positively impact our environment and society are no longer exclusive to high-net-worth angel investors or large investment funds. iForm is one such company, cleaning up plastic to build houses. iForm’s impact extends beyond its innovative engineering. With over 35 years of experience building from 99% recycled plastic bottles, iForm is contributing to the resolution of global housing and building crises, while making a positive impact on the environment. They have constructed several beach houses with plastic collected from the ocean. On their buildings a 200-year guarantee is provided. Their business is no longer a startup, but a proven and successful business model in which investors can come in and support the next expansion phase.

For those interested in making an impact with their investment, the best course of action is to consult with a financial adviser who understands not only the venture capital landscape but also the goals and priorities of the investor.

Find this article in Dockwalk’s March 2024 issue https://www.dockwalk.com/digital-dockwalk

This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity.



James Maxwell