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Economy

Hitting a bullseye in investing for impact – and sometimes aiming off-centre

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Whether it’s climate change, renewable energy or water scarcity, we all have areas we want to invest in – but it’s not always possible to hit that sweet spot straight away. Suzanne Biegel writes about the investment bullseye, and why aiming slightly off-centre is not always such a bad thing.

As I speak to more investors who want to use their capital for impact with a return, through my work at ClearlySo, one question keeps coming up: how do I focus on one area of impact and make real change there? This makes sense to me – when you have a cause you are committed to, why not focus your philanthropy and investing on tackling it?

For a climate change-focused investor, investing in a company like Abundance Generation (in the UK) would seem to be a potential investment to consider – a bullseye for her area of focus. It’s a deal that provides a direct challenge to the problem that investor cares about.

More frequently now, there are ‘bullseye’ investment deals in almost every area of social or environmental impact – from mental health provision to financial inclusion, or enabling the movement of artisanal goods from emerging markets. There are deals, and funds, out there, and investors can choose those that work for them.

Over the past few years, and particularly through screening deals for Clearly Social Angels and Investors’ Circle, I have found that hitting the bullseye isn’t always easy. You need not only the timing to be right, but also for the investments to be in solid companies and good deals for all parties. And there’s risk in everything. Diversification matters.

Personally, I invest with a climate change lens – to mitigate it, to manage its effects, to promote more sustainable ways of living. It’s key for me that my money is used to protect and preserve natural capital and to combat the destructive effects we have on our environment and our ability to thrive on the planet.

So, I might invest into something like Abundance in my ‘bullseye’ because it is specifically about increasing the portfolio of community renewables. But then along comes a deal that is about car sharing – a way of encouraging reduced consumption.

Do I say, no, that’s too far removed from the impact I want? Or do I see the opportunity to invest in a product that responds to a market need – if I invest, and it works, my influence will be positive, and my capital may be returned at a profit, giving me the opportunity to invest in more products, more companies, and more bullseye investments. I look at a deal and say, here’s the thing I want to change – is the impact of this business related to my target? Is it going some way towards creating the world I want to see?

If I am investing along a particular theme, I need to think about what effect I want – if my ‘frame’ is climate change, what is the landscape of direct and less direct areas that are open to me as an investor? Are we talking about mitigation or adaptation? Developed markets or emerging markets? What else has to go right for that company to make its impact?

For mitigation, this might mean thinking about buildings, transport and water – three of the biggest areas of energy consumption. If I’m thinking about adaptation, I’m thinking about companies and products that will support people to live with an increasingly unpredictable climate and the after effects of climate-related incidents.

Extremis Technology, for example, creates shelters and housing for people affected by earthquakes, hurricanes and floods. It is pretty far out from my bullseye investment, but there’s a through line there – and if I feel it’s a company that has the potential to scale, and meets my other criteria for a solid start-up, it could be a smart investment.

So once I know if I want to tackle mitigation or adaptation, or whatever piece of the climate change-related market opportunities or issues I want to address, I have to think about the impact I can have personally. Is it just my capital? Or are there businesses where I can add value on a board or as an advisor?

Realistically, I have to believe that the businesses have enough traction from enough customers to really make the difference I want. So does that mean investing with the crowd – following the wisdom of others? Or does it mean looking where great potential is under capitalised, and where my experience and contact book can help catalyse further investment?

How else might I invest my capital to support the environment? One circle out from the bullseye, I could invest in a company like GnewtCargo (it delivers for logistics companies, retailers and organisations – 100% emission free) or GoCarShare. It may or may not have as much direct impact towards climate change as Abundance, but it is businesses with a strong contribution to make to a sustainable future.

So what about zooming out a little further? Then I can see the opportunity in investing in advocacy, publishing and communications, or systems change consultancies – in companies such as GreenBiz or Purpose.

Or I might do a loan for a non-profit enterprise like Carbon Tracker, or the Carbon Disclosure Project, who are telling the real story about risk and stranded assets, and creating transparency in large companies. Yes, they aren’t directly creating products that mitigate climate change, or scaling up renewable technologies, but they are having an impact that galvanises change.

My climate change investing portfolio might look something like this – one bullseye and then other investments that orbit the cause I see as key:

Yes, it can be great to invest into a company that obviously, directly influences an area about which you are passionate. But it may or may not turn out to be the thing that scales your impact most, and it can be limiting – it limits your portfolio and your power as an investor – to look only at deals that hit the centre of the bullseye.

By widening your search – on your own, or through working with partners like ClearlySo –  you can aim for direct and indirect impacts, using your capital to influence the change you’re shooting for, with some diversification and, potentially, more impact in the long run.

Suzanne Biegel is senior adviser to ClearlySo. She founded Clearly Social Angels, the UK’s first impact-focused angel investing group, and Catalyst at Large, which helps to raise capital for social impact ventures and funds.

Photo: Asif Akbar via freeimages

Further reading:

Breaking the eight myths of sustainable and responsible investment

The nature of investing

Investing for the past or investing for the future?

Sustainable investment: what are you investing for?

The Guide to Sustainable Investment 2014 

Economy

Report: Green, Ethical and Socially Responsible Finance

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“The level of influence that ethical considerations have over consumer selection of financial services products and services is minimal, however, this is beginning to change. Younger consumers are more willing to pay extra for products provided by socially responsible companies.” Jessica Morley, Mintel’s Financial Services Analyst.

Consumer awareness of the impact consumerism has on society and the planet is increasing. In addition, the link between doing good and feeling good has never been clearer. Just 19% of people claim to not participate in any socially responsible activities.

As a result, the level of attention that people pay to the green and ethical claims made by products and providers is also increasing, meaning that such considerations play a greater role in the purchasing decision making process.

However, this is less true in the context of financial services, where people are much more concerned about the performance of a product rather than green and ethical factors. This is not to say, however, that they are not interested in the behaviour of financial service providers or in gaining more information about how firms behave responsibly.

This report focuses on why these consumer attitudes towards financial services providers exist and how they are changing. This includes examination of the wider economy and the current structure of the financial services sector.

Mintel’s exclusive consumer research looks at consumer participation in socially responsible activities, trust in the behaviour of financial services companies and attitudes towards green, ethical and socially responsible financial services products and providers. The report also considers consumer attitudes towards the social responsibilities of financial services firms and the green, ethical and socially responsible nature of new entrants.

There are some elements missing from this report, such as conducting socially responsible finance with OTC trading. We will cover these other topics in more detail in the future. You can research about Ameritrade if you want to know more ..

By this report today: call: 0203 416 4502 | email: iainooson[at]mintel.com

Report contents:

OVERVIEW
What you need to know
Report definition
EXECUTIVE SUMMARY
The market
Ethical financial services providers: A question of culture
Investment power
Consumers need convincing
The transformative potential of innovation
Consumers can demand change
The consumer
For financial products, performance is more important than principle
Competition from technology companies
Financial services firms perceived to be some of the least socially responsible
Repaying the social debt
Consumer trust is built on evidence
What we think
ISSUES AND INSIGHTS
Creating a more inclusive economy
The facts
The implications
Payments innovation helps fundraising go digital
The facts
The implications
The social debt of the financial crisis
The facts
The implications
THE MARKET – WHAT YOU NEED TO KNOW
Ethical financial services providers: A question of culture
Investment power
Consumers need convincing
The transformative potential of innovation
Consumers can demand change
PUTTING FINANCIAL SERVICES IN AN ETHICAL CONTEXT
An ethical economy
An ethical financial sector
Ethical financial services providers
GREEN, ETHICAL AND SOCIALLY RESPONSIBLE ISSUES IN FINANCIAL SERVICES
The role of investing
Divestment
The change potential of pensions
The role of trust
Greater transparency informs decisions
Learning from past mistakes
The role of innovation
Payments innovation: Improving financial inclusion
Competition from new entrants
The power of new money
The role of the consumer
Consumers empowered to make a change
Aligning products with self
THE CONSUMER – WHAT YOU NEED TO KNOW
For financial products, performance is more important than ethics
Financial services firms perceived to be some of the least socially responsible
Competition from technology companies
Repaying the social debt
Consumer trust is built on evidence
Overall trust levels are high
THE ETHICAL CONSUMER – SOCIALLY RESPONSIBLE ACTIVITIES
Payments innovation can boost charitable donations
Consumer engagement in socially responsible activities is high
Healthier finances make it easier to go green
SOCIALLY RESPONSIBLE COMPANIES
37% unable to identify socially responsible companies
Building societies seen to be more responsible than banks….
….whilst short-term loan companies are at the bottom of the pile
CONSUMER TRUST IN THE BEHAVIOUR OF FINANCIAL SERVICES COMPANIES
Overall trust levels are high
Tax avoidance remains a major concern
The divestment movement
Nationwide significantly more trusted
Trust levels remain high
CONSUMER ATTITUDES TOWARDS GREEN AND ETHICAL FINANCIAL PRODUCTS
For financial products, performance is more important than principle
Socially conscious consumers are more concerned
CONSUMER ATTITUDES TOWARDS TRANSPARENCY
Strategy reports provide little insight for consumers
Lack of clarity regarding corporate culture causes concern
Consumers want more information
THE ROLE OF FINANCIAL SERVICES FIRMS IN SOCIETY
The social debt of the financial crisis
THE SOCIAL RESPONSIBILITIES OF FINANCIAL SERVICES FIRMS
For consumers, financial services firms play larger economic role
Promoting financial responsibility
CHALLENGER COMPANIES AND SOCIAL RESPONSIBILITY
Consumer trust is built on evidence
The alternative opportunity
The target customer

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Economy

A Good Look At How Homes Will Become More Energy Efficient Soon

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energy efficient homes

Everyone always talks about ways they can save energy at home, but the tactics are old school. They’re only tweaking the way they do things at the moment. Sealing holes in your home isn’t exactly the next scientific breakthrough we’ve been waiting for.

There is some good news because technology is progressing quickly. Some tactics might not be brand new, but they’re becoming more popular. Here are a few things you should expect to see in homes all around the country within a few years.

1. The Rise Of Smart Windows

When you look at a window right now it’s just a pane of glass. In the future they’ll be controlled by microprocessors and sensors. They’ll change depending on the specific weather conditions directly outside.

If the sun disappears the shade will automatically adjust to let in more light. The exact opposite will happen when it’s sunny. These energy efficient windows will save everyone a huge amount of money.

2. A Better Way To Cool Roofs

If you wanted to cool a roof down today you would coat it with a material full of specialized pigments. This would allow roofs to deflect the sun and they’d absorb less heat in the process too.

Soon we’ll see the same thing being done, but it will be four times more effective. Roofs will never get too hot again. Anyone with a large roof is going to see a sharp decrease in their energy bills.

3. Low-E Windows Taking Over

It’s a mystery why these aren’t already extremely popular, but things are starting to change. Read low-E window replacement reviews and you’ll see everyone loves them because they’re extremely effective.

They’ll keep heat outside in summer or inside in winter. People don’t even have to buy new windows to enjoy the technology. All they’ll need is a low-E film to place over their current ones.

4. Magnets Will Cool Fridges

Refrigerators haven’t changed much in a very long time. They’re still using a vapor compression process that wastes energy while harming the environment. It won’t be long until they’ll be cooled using magnets instead.

The magnetocaloric effect is going to revolutionize cold food storage. The fluid these fridges are going to use will be water-based, which means the environment can rest easy and energy bills will drop.

5. Improving Our Current LEDs

Everyone who spent a lot of money on energy must have been very happy when LEDs became mainstream. Incandescent light bulbs belong in museums today because the new tech cut costs by up to 85 percent.

That doesn’t mean someone isn’t always trying to improve on an already great invention. The amount of lumens LEDs produce per watt isn’t great, but we’ve already found a way to increase it by 25 percent.

Maybe Homes Will Look Different Too

Do you think we’ll come up with new styles of homes that will take off? Surely it’s not out of the question. Everything inside homes seems to be changing for the better with each passing year. It’s going to continue doing so thanks to amazing inventors.

ShutterStock – Stock photo ID: 613912244

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