Five reasons for a traditional investor to try the impact market

There is no longer any doubt that impact investing is here to stay. Today, they gradually occupy the agenda of entrepreneurs, governments and, of course, investors. But, be honest, if there was an opportunity, would you, a traditional financial market investor, make investments in the impact business market?

If it only depended on the numbers, maybe the answer would come quickly. According to the 2020 edition of the Global Sustainable Investment Review, published by The Global Sustainable Investment Alliance, sustainable investment assets grew by 15% in the period 2018-2020, reaching US$ 35.3 trillion in the five main world markets (Europe, United States, Canada, Australia, New Zealand and Japan). In the same period, total professionally managed assets grew to US$ 98.4 trillion. But if a booming world market isn't convincing enough, here are five reasons to change your mind.

Below are listed the five reasons taken from the survey carried out in 2020 with 294 of the world's largest impact investors and which was organized by the Global Impact Investing Network (GIIN) with the objective of identifying how this investment market is developing.

We analyzed the 2020 survey by the Global Impact Investing Network (GIIN) and presented 5 reasons not to stop investing and follow the development of the impact market.

1. The impact investing industry remains diverse – Through the research, we found that small investors are the majority, emerging markets (such as sub-Saharan Africa, for example) attract a lot of interest and the largest allocation of capital has been directed towards private debt assets. Social and environmental impact are preferred as a performance target and there is widespread use of the SDGs as a performance measurement and management. On average, respondents target eight different themes aligned to the SDGs, reflecting the diversity of their impact objectives.

2. Impact investing has grown in depth and sophistication over time – Investors' perceptions of growth indicators and market evolution over the last five years have changed their motivations for committing their capital and determining the allocations of their investments. Remarkably, most see the market as continuously growing. Among the sectors preferred by impact investors are water, sanitation and hygiene, food, agriculture and healthcare, respectively. Finally, 99% of surveyed investors consider their capital contributions to have met their impact performance expectations. And 88% estimate that impact investments have met their expectations of financial returns.

3. Impact measurement and management practices have matured and opportunities for refinement remain – Impact measurement and management practices have evolved over the last decade and now reflect an increasingly strategic use for different purposes and different stages of the measurement cycle. The most commonly used management resources are the SDGs, the IRIS Metrics Catalog, the IRIS+ Core Metric Sets, and the five dimensions of the Impact Management Project impact convention. But the market points to a growing standardization, which will facilitate the access and use of this type of tools.

4. Impact investors have a positive outlook for the future despite headwinds – Investors consider that there are financial and impact risks to their portfolios. There was even a different perception of risk due to COVID-19. But this perception was directly related to the geopolitical and economic context of each investor. Areas most affected by the pandemic generated more pessimistic reactions. Despite this contingency, impact investors remain relatively positive about their future performance and say they want to contribute to reshaping financial markets so that they become more inclusive and sustainable.

5. The ultimate purpose – The global impact investing community can help build an inclusive, more resilient and much more sustainable future.

Want to be a part of it?

At Sitawi Every organization that is selected to receive funding through the Collective Loan Platform undergoes a thorough analysis that aims to validate 4 main pillars: recognized impact, ability to execute the business, ability to pay and ethical fiber . Thus, all businesses that participate in the Collective Loan Rounds are recognized by us as businesses with a positive impact. In addition, through in-depth analysis, the Sitawi approaches the reality of entrepreneurs, addressing better points of support to be developed by the monitoring team, which gives greater security to investors who support the organization.

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