We know that not all investments are the same from the point of view of externalities, even if they can present a similar financial return. In 2007, the term impact investing was coined to refer to investments that purposely seek a positive socio-environmental impact in addition to financial return. It is the evolution of the vision of balancing risk and return to balancing risk, return and impact.
According to the Brazilian Social Finance Task Force around R$13 billion were invested in social finance mechanisms in 2014 and this amount could reach R$50 billion in 2020. Social Finance represents a broad umbrella that includes from microcredit to subsidies in specific transactions to donations to strengthen the countryside to investments with high perspective of return in Impact Businesses.
When talking about impact investing, although capital investment (equity) is the most visible face of the field, loans can also be used to achieve the same ends and, with that, a door opens to support Impact Businesses as well non-profit. In summary, to have a positive socio-environmental impact, there is no lack of opportunities and instruments.
Leonardo Letelier is CEO of Sitawi Finance for Good. This text was originally written for CFP Professional Magazine, 9th edition – October/December 2016, published by Brazilian Association of Financial Planners – PLANEJAR, former IBCPF.
Members can access the electronic edition in this link.
