When Investments Become a Positive Force for Change
Olive Coulson takes a look at how to invest money in good causes that boost the well-being of nature and local communities as well as a bank balance.
12 December 2023
Many of us have ventured into the world of investments, usually with a focus on financial gains. However, imagine a scenario where your investments do more than just grow your wealth; they also become a force for positive change in society and the environment.
This is what impact investing is all about.
It’s a realm where financial gains co-exist with measurable social and environmental improvements. You’re not just tracking dollars and cents, but also the positive ripple effects your investments create in the world. While some initiatives are mere greenwashing, significant investments have been made into renewable energy, social housing, healthcare and the circular economy.
From the very beginning, every authentic impact investment is carefully planned with clear intentions and benchmarks. This clarity ensures that the investor and the enterprise understand what success entails, creating a shared vision of financial gain and meaningful impact. As the journey unfolds, the enterprise regularly reports on progress, providing a transparent view of the positive changes being made alongside the financial returns.
Much of the funding has gone to Aotearoa start-ups and SMEs that may otherwise struggle to find investment.
Examples of Impact Investing?
There are some powerful examples of impact investment being channelled to low-income countries. For example, private equity funds that target microinsurance for African families emerging from poverty, loans to an NGO providing roof-top solar in West Africa, and a revenue-sharing model in Belize that boosts the income of small farmers through the export of sustainable cacao.
Closer to home, New Zealand is witnessing a rise in impact investment funds. These include the Impact Enterprise Fund, Purpose Capital, Climate Venture Capital Fund, and Te Puna Hapori, as well as the government’s New Zealand Green Investment Finance. There are also some exciting impact ventures at grassroots level, such as Te Pai Roa Tika, a Māori-led and owned model that respects and draws on tīkanga to support impact investing in Northland.
There is huge potential to develop regenerative agriculture, native forests, and marine initiatives in Aotearoa. Investing in restoring our natural environment can also earn a financial return.
A challenge has been a lack of capital to scale up impact funding. This is starting to come from mainstream KiwiSaver and retail investment funds that invest a small proportion of their portfolios in impact enterprises. For example, Generate KiwiSaver was the first mainstream KiwiSaver fund to invest in a Salvation Army social housing loan to build 118 homes for homeless people in Auckland. The project’s organiser, Community Finance, has raised over $90 million of financing to enable community housing providers to ramp up their activity.
How do I invest for impact?
New Zealand's journey towards fully embracing impact investing is still evolving.
Unfortunately, most of the NZ impact investment funds are only available to wholesale and professional investors – those who either have a large amount to invest or investment experience.
For those interested in exploring this field, Mindful Money provides a practical solution. They have compiled a directory listing wholesale and retail impact investment funds available in NZ. This resource is invaluable for anyone looking to begin their impact investment journey.
A key is to shift funding from doing harm to doing good. This process has started.
Most KiwiSaver and investment funds have started to move along the “spectrum of impact” from ignoring social and environmental issues to progressively improve their real-world impact. Mindful Money provides a free tool that allows anyone to see the company investments in their KiwiSaver or investment fund.
Embarking on impact investing is more than a financial choice; it's a step towards a future where our investments reflect our care for the planet and its communities. It’s about making our financial decisions count for more, supporting projects that not only grow our wealth but also contribute to societal and environmental well-being.
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