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Why impact investment could soon be a trillion-dollar industry

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By the end of the decade, impact investment has the potential to reach $1 trillion (£600 billion) and deliver significant social benefits, according to Jennifer Kenning, director of wealth management and spearhead of impact investing at US wealth management firm Aspiriant.

Aspiriant manages around $8 billion (£4.8 billion) and serves families with $1.5m (£900,000) in investable assets upwards. Over the last 24-36 months, Kenning says the firm has noticed an upward trend in the number of clients asking about impact investment opportunities and to be educated on the rapidly growing sector.

A relatively young form of investment, impact investors seek to have impact across a double bottom line – delivering both financial returns and social good. While the concept of investing for social good has been around for decades, it is only in recent years that the term ‘impact investment’ has emerged. The market has seen accelerated growth, with large financial players like Deutsche Bank, UBS and Goldman Sachs all interested.

“Impact investing is a way of putting money with purpose and driving your mission in a for-profit manner that could have far greater capabilities than in a traditional non-profit grant manner”, Kenning explains.

“I look at it from an infrastructure perspective; when you are trying to tackle the issues of clean drinking water, energy, housing, education and healthcare. These are very large infrastructure problems and, I believe, will take for-profit capital to be able to tackle the issues in a manner that is going to be to scale and in a reasonable amount of time.”

The benefits impact investment can have on society were put into perspective for Kenning during a recent executive immersion trip to Africa. She says not only did the trip highlight the difficulties families and communities go through, but also the challenges companies are faced with when trying to get goods and services to developing areas.

Kenning adds that over the last 50-100 years, we have seen that relying strictly on aid is not “moving the needle forward”. Therefore, she believes impact investment is uniquely placed to address the issue. “One of the most resounding things I got on the trip was that they want the opportunity, not the hand out”, she adds.

The impact investment market is currently worth around $50 billion (£30 billion) globally, but Kenning believes it has the potential to be worth $1 trillion (£600 billion) in the next five years. This is because the lines between investment portfolios and philanthropic objectives are becoming blurred and impact investing could soon be part of everyone’s asset allocation, she says.

However, Kenning adds that in order to achieve this, the industry needs to have the institutionalised process that there is in traditional markets – along with benchmarks, proper reporting, standardized language and due diligence.

Whilst that trillion-dollar figure represents only a small portion of the total amount of money in the capital market, this would have a huge impact on the global economy and well-being of the world’s population.

Kenning says, “I think that by 2020 we will start to see really great change from these investments and by 2030 we could have a significant impact on the people that live on less than $2 (£1.20) a day.

“I think once you have products, process and people behind impact investment, you will start to have outcomes and solutions.”

Jennifer Kenning, director of wealth management and spearhead of impact investing at Aspiriant

When it comes to investors, there is definitely demand. A survey published last year by the sustainable bank Triodos found that 3 million investors in Britain alone will consider investing in social projects this year. However, a lack of knowledge – particularly among financial advisers – is hampering further growth in the sector.

Kenning explains, “The clients trust the gatekeeper. If the gatekeeper isn’t going to open the capital, then it’s not going to flow

into the system.

“The demand is definitely there. There is not one client that I have spoken to that isn’t excited once you have walked them though it. The data says that 81% of clients would make an investment in impact investing if they understood it and their adviser was educating them on it.”

Interest in the sector is also expected to continue growing, as those under the age of 35 begin to inherit money from the baby boomers above them. The younger generation “tie purpose into everything they do” and operate businesses completely different from their predecessors, Kenning says. As a result, impact investment will be driven by the next generation who want to see social return and financial return exist in the same opportunity.

As well as a moral advantage, research demonstrates that impact investing can have a positive impact on financial returns. As a result, these types of investments can create a double bottom line and achieve both social benefits and attractive returns, something Kenning describes as a “win-win” for investors and society.

She added, “I also think that what you saw in [the financial crash of] 2008/09 demonstrated to investors that some impact investment portfolios hold up better due to the environments you’re investing in.”

When it comes to selecting where to place your money, Kenning urges investors to pick an enterprise or issue they are passionate about and connect with, as well as assessing performance and other benchmarks.

“A lot of our clients are really focused on domestic impact investment, for both social and environmental projects. I think clients want to adopt a model of really helping their local communities. They want to see the good in their back yard”, she says.

Many investors who focus on developing nations have other ties to the area, such as through travelling or operating businesses there, Kenning explains. Others opt for investing in these regions because they enjoy having their money – and therefore impact – on a greater scale than it would in domestic markets alone.

If the impact investment market continues to grow, it has the potential to change the financial world for the better, allowing it to address global challenges and benefit the whole of society.

Kenning concludes, “I think we have more to lose by not trying impact investment than by trying. We have to do something; we are running out of resources and we have a population that is continuing to grow; we have 7 billion people today and will have 9 billion people by 2050. We have to be able to feed them, provide them with water and give them opportunities.“

Jennifer Kenning, is director of wealth management and spearhead of impact investing at US wealth management firm Aspiriant. Follow Aspiriant on Twitter: @AspiriantNews

Photo: Aspiriant

Further reading:

Report ‘de-risks’ impact investment to open sector up to mainstream

Triodos survey says 3m may consider social investment in next year

Fiona Woolf: London must lead in social impact investment

Impact investment ‘developing rapidly’, says UKSIF report

Impact investment: ESG practices increase risk-adjusted in the long-term

Economy

How Going Green Can Save A Company Money

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going green can save company money
Shutterstock Licensed Photot - By GOLFX

What is going green?

Going green means to live life in a way that is environmentally friendly for an entire population. It is the conservation of energy, water, and air. Going green means using products and resources that will not contaminate or pollute the air. It means being educated and well informed about the surroundings, and how to best protect them. It means recycling products that may not be biodegradable. Companies, as well as people, that adhere to going green can help to ensure a safer life for humanity.

The first step in going green

There are actually no step by step instructions for going green. The only requirement needed is making the decision to become environmentally conscious. It takes a caring attitude, and a willingness to make the change. It has been found that companies have improved their profit margins by going green. They have saved money on many of the frivolous things they they thought were a necessity. Besides saving money, companies are operating more efficiently than before going green. Companies have become aware of their ecological responsibility by pursuing the knowledge needed to make decisions that would change lifestyles and help sustain the earth’s natural resources for present and future generations.

Making needed changes within the company

After making the decision to go green, there are several things that can be changed in the workplace. A good place to start would be conserving energy used by electrical appliances. First, turning off the computer will save over the long run. Just letting it sleep still uses energy overnight. Turn off all other appliances like coffee maker, or anything that plugs in. Pull the socket from the outlet to stop unnecessary energy loss. Appliances continue to use electricity although they are switched off, and not unplugged. Get in the habit of turning off the lights whenever you leave a room. Change to fluorescent light bulbs, and lighting throughout the building. Have any leaks sealed on the premises to avoid the escape of heat or air.

Reducing the common paper waste

paper waste

Shutterstock Licensed Photo – By Yury Zap

Modern technologies and state of the art equipment, and tools have almost eliminated the use of paper in the office. Instead of sending out newsletters, brochures, written memos and reminders, you can now do all of these and more by technology while saving on the use of paper. Send out digital documents and emails to communicate with staff and other employees. By using this virtual bookkeeping technique, you will save a bundle on paper. When it is necessary to use paper for printing purposes or other services, choose the already recycled paper. It is smartly labeled and easy to find in any office supply store. It is called the Post Consumer Waste paper, or PCW paper. This will show that your company is dedicated to the preservation of natural resources. By using PCW paper, everyone helps to save the trees which provides and emits many important nutrients into the atmosphere.

Make money by spreading the word

Companies realize that consumers like to buy, or invest in whatever the latest trend may be. They also cater to companies that are doing great things for the quality of life of all people. People want to know that the companies that they cater to are doing their part for the environment and ecology. By going green, you can tell consumers of your experiences with helping them and communities be eco-friendly. This is a sound public relations technique to bring revenue to your brand. Boost the impact that your company makes on the environment. Go green, save and make money while essentially preserving what is normally taken for granted. The benefits of having a green company are enormous for consumers as well as the companies that engage in the process.

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Energy

5 Easy Things You Can Do to Make Your Home More Sustainable

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sustainable homes
Shutterstock Licensed Photot - By Diyana Dimitrova

Increasing your home’s energy efficiency is one of the smartest moves you can make as a homeowner. It will lower your bills, increase the resale value of your property, and help minimize our planet’s fast-approaching climate crisis. While major home retrofits can seem daunting, there are plenty of quick and cost-effective ways to start reducing your carbon footprint today. Here are five easy projects to make your home more sustainable.

1. Weather stripping

If you’re looking to make your home more energy efficient, an energy audit is a highly recommended first step. This will reveal where your home is lacking in regards to sustainability suggests the best plan of attack.

Some form of weather stripping is nearly always advised because it is so easy and inexpensive yet can yield such transformative results. The audit will provide information about air leaks which you can couple with your own knowledge of your home’s ventilation needs to develop a strategic plan.

Make sure you choose the appropriate type of weather stripping for each location in your home. Areas that receive a lot of wear and tear, like popular doorways, are best served by slightly more expensive vinyl or metal options. Immobile cracks or infrequently opened windows can be treated with inexpensive foams or caulking. Depending on the age and quality of your home, the resulting energy savings can be as much as 20 percent.

2. Programmable thermostats

Programmable thermostats

Shutterstock Licensed Photo – By Olivier Le Moal

Programmable thermostats have tremendous potential to save money and minimize unnecessary energy usage. About 45 percent of a home’s energy is earmarked for heating and cooling needs with a large fraction of that wasted on unoccupied spaces. Programmable thermostats can automatically lower the heat overnight or shut off the air conditioning when you go to work.

Every degree Fahrenheit you lower the thermostat equates to 1 percent less energy use, which amounts to considerable savings over the course of a year. When used correctly, programmable thermostats reduce heating and cooling bills by 10 to 30 percent. Of course, the same result can be achieved by manually adjusting your thermostats to coincide with your activities, just make sure you remember to do it!

3. Low-flow water hardware

With the current focus on carbon emissions and climate change, we typically equate environmental stability to lower energy use, but fresh water shortage is an equal threat. Installing low-flow hardware for toilets and showers, particularly in drought prone areas, is an inexpensive and easy way to cut water consumption by 50 percent and save as much as $145 per year.

Older toilets use up to 6 gallons of water per flush, the equivalent of an astounding 20.1 gallons per person each day. This makes them the biggest consumer of indoor water. New low-flow toilets are standardized at 1.6 gallons per flush and can save more than 20,000 gallons a year in a 4-member household.

Similarly, low-flow shower heads can decrease water consumption by 40 percent or more while also lowering water heating bills and reducing CO2 emissions. Unlike early versions, new low-flow models are equipped with excellent pressure technology so your shower will be no less satisfying.

4. Energy efficient light bulbs

An average household dedicates about 5 percent of its energy use to lighting, but this value is dropping thanks to new lighting technology. Incandescent bulbs are quickly becoming a thing of the past. These inefficient light sources give off 90 percent of their energy as heat which is not only impractical from a lighting standpoint, but also raises energy bills even further during hot weather.

New LED and compact fluorescent options are far more efficient and longer lasting. Though the upfront costs are higher, the long term environmental and financial benefits are well worth it. Energy efficient light bulbs use as much as 80 percent less energy than traditional incandescent and last 3 to 25 times longer producing savings of about $6 per year per bulb.

5. Installing solar panels

Adding solar panels may not be the easiest, or least expensive, sustainability upgrade for your home, but it will certainly have the greatest impact on both your energy bills and your environmental footprint. Installing solar panels can run about $15,000 – $20,000 upfront, though a number of government incentives are bringing these numbers down. Alternatively, panels can also be leased for a much lower initial investment.

Once operational, a solar system saves about $600 per year over the course of its 25 to 30-year lifespan, and this figure will grow as energy prices rise. Solar installations require little to no maintenance and increase the value of your home.

From an environmental standpoint, the average five-kilowatt residential system can reduce household CO2 emissions by 15,000 pounds every year. Using your solar system to power an electric vehicle is the ultimate sustainable solution serving to reduce total CO2 emissions by as much as 70%!

These days, being environmentally responsible is the hallmark of a good global citizen and it need not require major sacrifices in regards to your lifestyle or your wallet. In fact, increasing your home’s sustainability is apt to make your residence more livable and save you money in the long run. The five projects listed here are just a few of the easy ways to reduce both your environmental footprint and your energy bills. So, give one or more of them a try; with a small budget and a little know-how, there is no reason you can’t start today.

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