As we continue through tumultuous times across the globe, we see many investors pulling away from investments that are more risky or offer a reduced rate of return. Depending where your risk appetite lies, limiting your returns by investing with your heart versus your head can be a net negative, but there are times when investing with your head AND your heart can be a positive sum gain – no matter the financial ROI.
I am not suggesting that all sustainable or impact investments should be philanthropic in nature, but the ability to quantify returns – both financial and “better for you” metrics – can make great returns on multiple levels. Many traditional investment firms look at market-based returns as being critical, but there are very few metrics for impact investing that can be quantified in the same manner. So, it’s important to know where you stand on your expectations and what a return should look like to you and your firm on multiple levels. Should you see it as market building, giving people opportunities, scalable impact in developing markets or building a better tomorrow, understanding minimum rates of returns as well as maximum impact are critical for the investor looking at different outcomes.
I spoke to a friend of mine this morning, Prasoon Kumar, who is the Co-founder of Billion Bricks where he works to combine green energy with affordable home building for impoverished families. He has already completed a show home in the Philippines, and is in the process of working with real estate developers to sell to the homes to families that want to build a new way of living. His vision and mission are clear, and he is driven by both purpose and returns. His key stakeholders get it, and they are building a scalable company while doing “good”. But, as many of us know, doing “good” can be a bad word when raising money. And, as fundraising is a fickle business many applaud his efforts, but don’t see the net benefit on multiple fronts - Even though his business plan and partners are international MNCs.
So, when we look at the impacts that we make from our more traditional investments, we need to also look at what the needs are of our fellow global citizens, our communities and our environment in general. And while financial returns are much easier to quantify, the impact a company makes is not just measured on the balance sheet anymore. More companies are helping to quantify this such as 60 Decibels are doing the grass roots work of collecting data from impact investing. So its coming, and, if you look around you, its more timely than ever.
Check out Prasoon Kumar and Billion Bricks and see the great things he and his team are doing. And don’t forget that all investment returns are not created equally.
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