We live in a world with many existential challenges – from climate change to social unrest to income inequality. And while all of this might seem reason for despair, there is also great reason for hope that change is possible: the demand for impact investing is growing[1].
Impact investing, by definition[2], is an investment strategy that looks to generate specific – and positive – social or environmental effects, in addition to financial gains. These can be investments[3] in a variety of asset classes – from stocks to bonds, and can take place in both the private and public markets.
But the end goal is the same: Putting investor money and capital to work to build a better world.
Why Now is the Right Time for Impact Investing
In light of all the challenges we face, investors interested in sustainable investing have an opportunity to consider the full impact of their portfolio – and to invest their wealth in ways that support positive changes. “Whether it’s climate, income inequality or other social issues, it’s critical we direct capital to companies offering solutions for these problems,” says Stephanie Tsui, Genus Portfolio Manager and Head of Foundations & Non-Profits. “From a climate perspective, we might be late, but better late than never.”
Recently, Tsui hosted a webinar [4] that took an in-depth look at some of the impact investments we hold in our funds and through our Impact Investment Counsel (a fully managed, customized impact portfolio management service). At Genus, impact investing runs the gamut from liquid impact investments in public companies to illiquid impact (private equity), venture impact and philanthropic impact investments; the last three categories are higher risk, and thus available only to accredited investors.
With the planet and our oceans growing warmer[5] with each passing year – and Covid-19 exacerbating longstanding issues such as gender and income inequality[6] – now is the perfect time for investors of all stripes to consider deploying resources to impact investing.
At Genus, we measure impact investments[7] based on the percentage of revenues being generated from a company’s products or services that contribute to global sustainable development goals (SDGs)[8], defined by the UN’s 2030 Agenda for Sustainable Development.
These 17 SDGs cover everything from clean water and sanitation to zero hunger and gender equality. We carefully vet the companies and funds in our portfolios – ensuring that they address the SDGs while also delivering appropriate financial returns.
How Impact Investing is Changing Our World
One standout example of an impact company in our portfolio is Enphase Energy[9], a publicly traded technology firm that develops and manufactures solar micro-inverters, battery energy storage and EV charging stations. Investor capital is contributing to its ability to develop solutions to the climate challenge: as of October 2022, Enphase had installed more than 2.7 million systems in more than 145 countries[10] and diverted 31 million metric tonnes of CO2 from entering the atmosphere — enough to power almost four million homes for one year.
That said, much of impact investing happens at a smaller scale — and at the intersection of several social and environmental factors. You can’t consider the plight of our climate, for instance, without also considering the plight of women, racialized populations and the economically insecure. That is the perspective of Alexa Blain, co-founder and managing partner of Deetken Impact, a Vancouver-based impact investing firm[11] operating in Latin America and the Caribbean.
Blain, along with her colleague, Rachel Murphy – Deetken’s Impact and Gender Officer – joined our recent webinar to explain how Deetken’s investment products (focused on sustainable energy and alternative financing projects) are having a tangible impact across the Global South.
“We’re always looking for investments that are going to generate an appropriate financial return for the risk that we’re taking,” says Blain. “But we direct our capital toward companies that are generating social and environmental benefits as core to their business model. We also aim to amplify the impact of those companies by engaging directly with them.” With investments in 18 countries in Latin America and the Caribbean, Blain notes the importance of building a regional team with local expertise. Deetken Impact currently has employees in 6 countries, enabling the team to more easily access and support companies with a successful capital raise and technical assistance.
Murphy, based in Guatemala, is one of those experts. She leads the institution’s Gender Lens Investing strategy and has an important role in the Ilu Women’s Empowerment Fund – a portfolio of impact companies with a gender focus. Deetken Impact also supports portfolio companies with tailored support to advance gender business practices. “The data on the benefits of how gender diversity improves financial performance is clear,” says Murphy. “So we have a financial interest in advancing a company’s gender business practices to reduce the risks posed by not having diversity within their team.”
In just three years, the Ilu Women’s Empowerment Fund has supported 25 companies[13] in the region and helped nearly 600,000 women to receive financing. And, because of its work, almost 65,000 tons of CO2 have been displaced from the atmosphere.
For many — including Alexa Blain —the ultimate sign of success for impact investing is that it makes itself redundant as it becomes ingrained in our world. “I think we all hope that, 10 years from now, there won’t be impact investing,” says Blain. “There won’t be gender-lens investing, because it will all be fully integrated – much like responsible investing is, where 90% of assets managed today have some kind of ESG overlay. In 2023, impact investing is just smart investing.”
Genus is a proud partner of Deetken Impact and their Ilu Women’s Empowerment Fund is included in our Impact Investment Counsel offering.
[1]Laker, B. (2022) Demand for impact investing is rising. here’s why, Forbes. Forbes Magazine. Available at: https://www.forbes.com/sites/benjaminlaker/2022/11/17/demand-for-impact-investing-is-rising-heres-why/?sh=90aba4a285f8 (Accessed: December 9, 2022).
[2]Chen, J. (2022) Impact investing explained: Definition, types, and examples, Investopedia. Investopedia. Available at: https://www.investopedia.com/terms/i/impact-investing.asp (Accessed: December 9, 2022).
[3]Ganti, A. (2022) What are asset classes? more than just stocks and Bonds, Investopedia. Investopedia. Available at: https://www.investopedia.com/terms/a/assetclasses.asp (Accessed: December 9, 2022).
[4]Genuscap.com. (2022) Watch On Demand – Sustainable spotlight, Genus. Available at: https://genuscap.com/sustainable-spotlight/ (Accessed: December 9, 2022).
[5]Global surface temperature (2022) NASA. NASA. Available at: https://climate.nasa.gov/vital-signs/global-temperature/ (Accessed: December 9, 2022).
[6]Is covid-19 increasing global inequality? (no date) World Bank Blogs. Available at: https://blogs.worldbank.org/opendata/covid-19-increasing-global-inequality (Accessed: December 9, 2022).
[7]Genuscap.com. (2021) Who makes the Cut – How we select companies for our impact investing portfolios, Genus. Available at: https://genuscap.com/who-makes-the-cut/ (Accessed: December 9, 2022).
[8]Genuscap.com. (2022) How our impact portfolios align with the United Nations’ Sustainable Development Goals, Genus. Available at: https://genuscap.com/how-our-impact-portfolios-align-with-un-sdgs/ (Accessed: December 13, 2022).
[9]Discover our journey to Global Renewable Energy leader (no date) Enphase. Available at: https://enphase.com/about-us (Accessed: December 13, 2022).
[10]Investor relations (no date) Enphase Energy. Available at: https://investor.enphase.com/ (Accessed: December 13, 2022).
[11]Genuscap.com (2022) How canadian impact investors are empowering Latin American women, Genus. Available at: https://genuscap.com/how-canadian-impact-investors-are-empowering-latin-american-women/ (Accessed: December 13, 2022).
[12]ILU Women’s empowerment fund (2022) Ilu Women’s Empowerment Fund. Available at: https://iluwomensempowermentfund.com/ (Accessed: December 13, 2022).
[13]IWEFsupport (2022) Pioneering initiative ILU women’s empowerment program accelerates gender lens investing in Latin America and the Caribbean, Ilu Women’s Empowerment Fund. Available at: https://iluwomensempowermentfund.com/pioneering-initiative-ilu-womens-empowerment-program-accelerates-gender-lens-investing-in-latin-america-and-the-caribbean/ (Accessed: December 13, 2022).
