Impact Investing Strategies: How to be a Better Trailblazer

From sustainable environmental solutions, to funding the underdog, check out the ways impact investing strategies are shaping our world 

Entrepreneurs set out to accomplish great things; some dream of building empires big and small, others want to change the status quo, and some want to make a meaningful difference in the world. Whatever the reason, every year approximately 100 million startups are launched globally (that's 3 new startups per second!). 

With such high numbers of innovation, it's no surprise that a portion of these startups are not just changing the status quo, they’re making meaningful, lasting impact as they go. Providing the fuel for these particular startups, is a particular set of investors - welcome to the world of Impact Investing. 

This booming industry, which was estimated at $228 billion in 2017, is expected to reach around $1 trillion by 2025. But what's all the fuss about? Read on to find out our take on Impact Investing from experts at Angels Partners.

What is impact investing?

So, what exactly is impact investing? Unlike traditional investors, impact investing aims to prioritize not only profit, but meaningful change in areas such as sustainability, economic development and social equity. This type of investment strategy combines financial return and measurable social or environmental impact. Without sounding crass, these guys are the “good” guys! 

What are the core principles of impact investing?

At the very heart of any project will be the underlying motivations and core principles steering the helm. Unlike ordinary investors and VCs, impact investing firms hold a set of intentions that go beyond just securing financial success, as they encourage meaningful change alongside steady financial returns. These principles may include:

• Social or Environmental Improvements: Impact investors specifically fund startups and small businesses that seek to improve areas such as social equity and environmental sustainability.
• Financial Gains: As an investor, making a profit is the aim of the game, but with impact investing at least the financial is made through meaningful and impactful projects.
• Measurable Impact: With impact investing, it's not enough just to seem to make a difference, anyone can say they are bettering the world. Instead, clear, traceable and measurable benefits must be demonstrated from impact investment.

On the path of entrepreneurship, finding the right investor for your project is of utmost importance, as your vision and theirs need to align for the project to succeed in the long term. At Angels Partners we’ve streamlined the fundraising process, making it all the more easier for you ro find the perfect fit. From our growing database of over 120k investors, you can even filter for stage, location and impact investment, so you can connect with the right investor for your project. 

What are some examples of impact investing?

In our current socio-cultural landscape of high levels of consumerism, where we prioritize immediacy and profit over sustainability, it's not surprising that the planet is suffering. From the continued use of non-renewable energy and the rise of intensive farming, impact investment firms aim to counterbalance these detrimental practices in the following ways:

• Agriculture - With the expansion of farming practices to accommodate the drive towards mass consumerism, the planet and agricultural practices have taken a hit. As such, impact investment firms have turned to support sustainable agriculture and eco-friendly farming practices.
• Energy - Switching to renewable energy sources, such as geothermal, hydropower, wind and solar, is often financed by impact investment firms who seek to combat the effects of climate change.
• Finance - For many entrepreneurs raising funds is one of the major challenges: even with a solid product, clear market fit and an outstanding team of founders, securing capital is a major obstacle if you don’t have a large network or come from an underprivileged community. However, impact investment firms are known to provide small loans to these entrepreneurs.

What are the best impact investing strategies?

As with any type of investment opportunity, having the right approach is key. Even though impact investors are trying to make meaningful change in the world, their fundamental goal is to balance impact with financial success. So then, what are the best impact investment strategies? The best strategies for impact investing can be grouped into the following areas:

• Thematic: Many impact investing firms focus on a specific area or theme. For example, if a firm is focussed on addressing the global challenge of climate change, they might fund startups working in clean energy. Alternatively, if a fund is set on improving the rights of women, they could support startups that are women-led. 
• Screening: By filtering startups into two distinct categories, ones that are leaders in environmental, social and governance (ESG) areas and ones that harm society or the environment, investment funds can ensure they elevate and reward ethical and sustainable businesses, while avoiding and excluding companies that involve harmful practices, like tobacco, fossil fuels and child labour.
• Concessionary Returns: For some investors and VC firms, it's not always about making a buck. In this case, measurable ESG changes are prioritized over financial incentives. For example, investment into affordable housing projects, with low rental yields, places the increased social value above the financial, making these firms truly impactful for underserved communities.
• Community: In an effort to improve the economic reality of disadvantaged communities, by focusing on community-driven projects, impact investment firms can ultimately create jobs, improve housing and enhance economic development and opportunities in less affluent communities.
• Blended: Many impact investors combine multiple strategies to diversity risk and maximise their impact. One example would be a foundation that allocates capital to community-driven projects, prioritizing impact over return, or a pension fund that integrates ESG screening. 

Whether it's through environmentally friendly means, financial inclusion or accessible housing, impact investment firms support small businesses in working towards a better world, whilst simultaneously earning returns on their investment. 

Best impact investment funds

Now that we know what impact investing looks like and the various strategies these firms adopt, getting to know some of the organizations contributing through impact investing seems like a good place to finish. Some of the firms making meaningful investment include:

1. S2G Ventures: With a strong focus on sustainability and eco-farming, this firm focuses on supporting companies seeking to develop sustainable agriculture technologies and improve food systems.
2. Lowercarbon Capital: As the name suggests, this fund supports startups that are seeking innovative solutions to the rise in carbon dioxide, through methods like carbon capture. Their approach to fight the climate crisis leans townards market-driven solutions.
3. Reach Capital: For Reach Capital, fair and equitable access to quality education is their primary focus. By supporting startups that promote lifelong learning opportunities and improve access to education for minority groups and the disadvantaged, Reach Capital is a true impact investing firm.
4. Chrysalix Venture Capital: With a keen eye on sourcing efficient resources and clean energy, Chrysalix Venture Capital supports young startups that are driving sustainable industrial development.
5. Acumen: Despite the continued rise in the standard of living in western countries, developing nations experience distinctly reduced access to basic and essential social and healthcare services. Acumen seeks to change this by providing capital to startups dedicated to improving critical issues that arise from poverty.
6. Jonathan Rose Companies: As for the housing sector, Jonathan Rose Companies invests capital in companies developing affordable, eco-friendly and accessible housing, with the vision of cultivating more sustainable and equitable communities.
7. Accion: Another impact investing firm that seeks to improve the social and economic landscape of disadvantaged communities is Accion. By investing in microfinance institutions and fintech companies, Accion promotes economic inclusion to the most underserved populations.
8. Kaiser Permanente Ventures: Access to healthcare, although a pillar of longevity, is a huge issue for many people. At Kaiser Permanente Ventures, providing financial support to startups improving access to medical services seeks to improve health outcomes, especially for the most disadvantaged communities.

If building a better tomorrow without jeopardizing the environment, or seeking to elevate social and economic standards for the underserved sounds like your cup of tea, then check out impact investment firms in your industry, and get the right support for your business. Why not head over to Angels Partners and start connecting with relevant investors today!