Impact investments are “investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return. Impact investments can be made in both emerging and developed markets, and target a range of returns from below market to market rate, depending on investors’ strategic goals” (The GIIN).
The growing impact investment market collectively manage over US$ 715 billion in impact investing assets, according to GIIN 2020 data, and offers a sustainable social and enviromental business model. The organizations that make impact investments are mostly fund managers, foundations, banks, family offices, pension funds and insurance companies, mainly from the United States, Canada and Europe (GIIN Anual Impact Investor Survey 2019) .
Impact funds often follow the model of venture capital funds, but include instruments that go beyond equity, such as debt type loans or convertible debt. Like venture capital funds, they diversify the risk and return on investments.
As of July 2020 there were 6 managers of impact investing funds in Chile that manage assets for US$ 318 million, generating financial return for investor and at the same time solving social and environmental challenges (Radiografía sobre la Inversión de Impacto, 2020). This figure implies an increase of more than double the US$ 138.2 million registered in 2018 (Guía Inversión de Impacto en Chile, 2019).
However, there are still challenges to face. The Cataliza Chile 2018 meeting brought together a group of more than 30 public and private institutions with the objective of making a diagnosis of different areas of the impact and sustainable finance investment industry in Chile. Actors involved reached a consensus regarding the need to make changes at a cultural level and generate more information and dissemination that allows mobilizing capital to the world of impact investment. Along with this, it is perceived that there are shortcomings regarding the infrastructure and regulation that sustain both supply and demand of capital to accelerate its growth.
More information on impact investing in:
– Radiografía sobre la Inversión de Impacto en Chile, ACAFI (Spanish)
– Guía para la Inversión de Impacto en Chile, ACAFI-UC (Spanish)
– Cataliza Chile 2018 (Spanish)
– The GIIN
– Monitor Institute
– Rockefeller Foundation
– GSG Impact Investing
Environmental: Concerns any activity of the company that affects the environment positively or negatively. For example, emissions of greenhouse gases, renewable energy, energy efficiency.
Social: Includes aspects related to the community, such as health, human rights, workers’ rights, controversial business practices.
Corporate governance: Considers issues such as the quality of management, culture and risk profile of the company accountability, transparency and lobbying. (Guía Inversión de Impacto en Chile, 2019).