What’s Driving the Demand for ESG Investing: 3 of the Biggest Trends in Impact Investing You Should Know About

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The demand for ESG investing at wealth management companies is on the rise. Although the idea of socially responsible investing (SRI) goes back centuries, the past decade (and particularly the past year) has seen a spike in the demand for ESG investing (which takes environmental, social and governance practices into consideration), as well as increased demand for impact investing, which goes further than simply reviewing ESG factors and focuses on investments that create positive outcomes beyond financial return.

In 2020, according to the Global Impact Investing Network (GIIN), the size of the impact investing market topped $715 billion (U.S.) worldwide. As impact investing has grown, it has also become more complex—sparked by investor demands for new types of impact investment opportunities.

That’s why we’ll be deconstructing the three biggest trends in impact investing in 2021 on April 15, in a free webinar you’re invited to join. Our guests are leaders in Canada’s impact investing space and will be speaking about three key types of impact investing:

Getting in on early-stage capital investments

As Mari Mathews describes it, her role at Spring Activator is a simple one: “We exist to change the world through entrepreneurship.” Spring works with both impact investors who are driving the demand for ESG investing and entrepreneurs who are looking to raise capital—supporting everything from hyper-local impact entrepreneurs in Vancouver to start-ups across Canada and the U.S. In each case, she says, the businesses have launched (even if the product isn’t yet on the market) and most have some revenue.

Covid has expedited people’s interest in having their money really make an impact.

Mari Mathews, Program Director, Spring Activator Tweet

Mathews says there is growing interest among investors to “get involved” with some of the efforts being undertaken by impact-driven companies, with Spring ultimately trying to build access to deal flow. She highlights Spring’s Impact Investor Challenge—a 10-week training program for early-stage impact investors and entrepreneurs—as one example of those efforts.

The pandemic has opened a lot of people’s eyes to the potential of early-stage investing, says Mathews. “Covid has expedited people’s interest in having their money really make an impact,” she says. “It’s changed the way we look at the world food system, food security, health tech and med tech, among many other things. People want to invest in early-stage companies that are reacting to the current situation and improving our systems.”

Making an impact close to home

Adam Spence founded Social Venture Connexion (SVX) 10 years ago to create what he calls a social stock market. “Whether it’s an affordable housing project or a fair-trade shoe company or a solar-powered co-op, the idea was: How do you create a place where folks can find and make these kinds of investments?”

Whether it’s an affordable housing project or a fair-trade shoe company or a solar-powered co-op, the idea was: How do you create a place where folks can find and make [place-based] investments?

Adam Spence, Founder, Social Venture Connexion (SVX) Tweet

The driving focus at SVX is place-based impact investing—what the Urban Institute defines as “the local deployment of impact capital: investments made with the intent to yield both financial and social and/or environmental returns to address the needs of marginalized communities.” That community could be a city or a region, says Spence, but the idea is that investors are having an impact in the area in which they live.

He points to social housing—and the affordability crisis faced by many communities—as a prime example. In this place-based scenario, a builder might access money from a local impact fund to create non-market housing—with investors getting paid back over time, as lenders do on a mortgage.

“It would provide another important source of capital,” says Spence. “Government used to build tens of thousands of social housing units a year; now, it’s maybe one or two thousand. And the need is just incredible.”

Addressing the climate crisis through impact investing

While Genus clients care about social impact, it’s the climate emergency that has really animated them in recent years, and has driven the demand for ESG investing, says Mike Thiessen. That’s why we created the suite of Genus Fossil Free funds, giving clients a clear path to investing in leaders in renewable energy while avoiding the oil, coal and gas companies that are accelerating climate change.

Clients are focusing more on technologies and investments that can help with climate action on an exponential basis, rather than an incremental basis.

Mike Thiessen, director of sustainable investments for Genus Tweet
The appetite for bold action and innovative solutions, and the ensuing demand for ESG investing has never been stronger. “Clients are focusing more on technologies and investments that can help with climate action on an exponential basis, rather than an incremental basis,” says Thiessen. “For a long time, people were focused on things like financing a solar-powered plant or wind power. Now, people are thinking more on the technology side.”
He points to companies like Carbon Engineering, based in Squamish, and Burnaby’s Ballard Power as two B.C.-based companies that promise big impact (and a big opportunity) through technology. “Clients are saying, ‘I want to invest in carbon-capture systems. I want to invest in hydrogen and the whole infrastructure that could be built out.’ They’re thinking about the big picture, more than ever before.”

Register now for our free webinar Impact Investing in Canada Webinar on April 15, and join us for a lively discussion and Q&A about the State of Impact Investing in Canada.

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“Back in 1992 when I found myself at fifty with a substantial amount of money to invest, I knew just one thing — that I didn’t want to contribute to tobacco companies, arms manufacturers, or oil. But over the ensuing years the options for socially responsible investing have become far more sophisticated and I’m very happy that this is a big part of the Genus approach. I also very much appreciate the long-term relationship with my portfolio manager, Mary Lou.”
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