Making an impact is a noble goal for any investor, whether they’re retail or institutional. Impact investing is the practice of investing not only to generate returns, but also social and environmental benefits.
The space has grown tremendously, with impact investing funds amassing over $77 billion in assets under management. From an individual’s standpoint, that number seems enormous, but it’s helpful to put it into perspective.
According to a Stanford Social Innovation Review article, achieving the United Nation’s Sustainable Development Goals (SDGs) by 2030 requires spending $5 to $7 trillion annually. For impact investing to have serious impact then, it needs seriously greater adoption, especially among Main Street investors, who typically haven’t had access to a variety of investment opportunities due to their exclusivity, geographic restrictions, and high investment minimums.
One company that aims to increase adoption is Invictus Capital, a group of alternative investments specialists currently launching the Emerging Markets Solar (EMS) Fund, enabling anyone to become an impact investor by contributing to global clean energy production via financing solar energy infrastructure projects.
This fund, as well as Invictus’ other funds, is “tokenized,” which means that investors will be able to receive returns from the fund by investing in a single token.
Stanford’s Social Innovation group recommends that impact investors anchor their strategy to market returns, which Invictus clearly strives to do through methods such as automatically reinvesting earnings to achieve compounding returns, and a partnership with the Sun Exchange, which has a strong track record to-date.
Via the blockchain-based transparency of the fund, Invictus also adheres to Stanford’s second recommendation: Making it clear that change is attributable to an investment. Finally, EMS adheres to the last recommendation of partnering with established players, as evidenced by Invictus’ partnership with the Sun Exchange.
Ultimately, the field of impact investing is poised to grow, as reported by a Wharton article. By offering impact investment opportunities through the simplicity of a single token, Invictus is making good on the potential of blockchain.
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In spite of the incredible potential (and the hype) of impact investing, a lot of challenges are ahead for the growth of the space. As written by SSIR, “the case for impact is often dubious,” and this lack of transparency can turn off potential investors from entering. When investments are publicly viewable on a digital ledger, greater transparency might convince those investors to enter the space.
Further, there’s still the notion that impact investing isn’t going to generate high returns. In the same article, Stanford writes: “Forget it—you’re not going to make any money.” Given the complete transparency of tokenized funds, as mentioned, investors won’t be as amenable towards weak returns, and will demand ROI. This is why funds like the Emerging Markets Solar fund are oriented first towards long-term returns.
Sure, the idea of impact is complex, and it’s uncertain which projects will truly make a difference. But one thing is for certain: Transparency will provide a much-needed boost for the industry.
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