As described in the article Calculating Value of Impact Investing; concerns about scarcity and inequality become increasingly urgent, many investors are eager to generate both business and social returns—to “do well by doing good.” One avenue is impact investing: directing capital to ventures that are expected to yield social and environmental benefits as well as profits.
Just over 10 years ago, JPMorgan and the Rockefeller Foundation, together with the Global Impact Investing Network (GIIN), published a report claiming that impact investment was an emerging asset class that would reach between $400 billion and $1 trillion in assets under management by 2020.
In 2020, the market reached roughly $715 billion in assets under management, according to GIIN. The International Finance Corporation (IFC) put the estimate even higher: $2.1 trillion.
According to Global Impact Investing Network, 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. There are four key elements:
■ INTENTIONALITY: Impact investments intentionally contribute to social and environmental solutions. This differentiates them from other strategies such as ESG investing, Responsible Investing, and screening strategies.
■ FINANCIAL RETURNS: Impact investments seek a financial return on capital that can range from below-market-rate to risk-adjusted market rate. This distinguishes them from philanthropy.
■ RANGE OF ASSET CLASSES: Impact investments can be made across asset classes.
■ IMPACT MEASUREMENT: A hallmark of impact investing is the commitment of the investor to measure and report the social and environmental performance of underlying investments.
Impact investment has attracted a wide variety of investors, both individual and institutional, which include Fund Managers, Development finance institutions, Diversified financial institutions/banks, Private foundations, Pension funds, and insurance companies, Family Offices, Individual investors, NGOs, Religious institutions.
Croatian early-to growth-stage startups with an environmental and social impact benefited from the country’s first social impact fund: the €30 million strong, Feelsgood Fund, launched 3rd October 2019 in Zagreb. The European Investment Fund (EIF) contributed to the Fund with €15 million, almost entirely covered by the European Fund for Strategic Investments (EFSI), the core of the Investment Plan for Europe, or the Juncker Plan.
Feelsgood Social Impact Investment Fund was founded by Dinko Novoselec, Renata Brkić, Domagoj Oreb, Pierre Matek. Feelsgood is designed to invest in Croatian and Slovenian ventures that have typical private equity/venture capital for-profit-aims like commercial business models. Led by the strong management team and ready to scale, but in addition, can and will deliver measurable social impact. Feelsgood is spotting and supporting businesses that can find a way to address, if they already have not, one or more of the 17 Sustainable Development Goals and make a measurable impact on a conscious sustainable strategy of their business models. Feelsgood Social Impact Investment Fund Portfolio is consisted of Mindsmiths, BE ON, TDA, Agrivi.
Why does Impact Investing Matter?
Regardless of where one lands on the spectrum, impact investing provides a tool for achieving social good with a wider array of assets than traditional philanthropy. Private foundations in the U.S., for example, can achieve social good with not only their 5% required annual payout, but also with the 95% endowment corpus that remains invested. To put this in perspective, U.S. foundations make annual grants totaling $60 billion, while holding assets totaling $865 billion.
