Let’s make investing for good the new norm! COVID-19 and Impact Investing
At the moment, it is evident that the coronavirus pandemic is not only causing loss of life and damage to the economy in many areas, but also huge opportunities are opening up. So could now be the time for socially responsible and effective investments to change the global economy sustainably? I say yes!
A moment for growth or a flight from risk?
Some see the opportunity for transformation in the financial sector, while others fear that the money will flee to liquid and perceived safe investments, because economic shocks, market volatility and uncertainty generally lead to investors taking a more conservative stance.
In any case, the economic shock of the COVID-19 pandemic has led most investors to lose money initially. Many have withdrawn their riskier investments and for the moment remain in a wait-and-see position. It would be more correct, and luckily there are also impact investors who see it the same way, to invest in order to help companies strengthen their resilience and contribute to the recovery.
Impact investing is more important than ever
Meredith Shields, Director of Impact Investing at the Sorenson Impact Foundation, thinks that Impact investors are a little more opportunistic and try to use their capital despite the challenges. They focus on key sectors such as healthcare, education, financial services and energy - they are positive to continue investing in areas that could possibly experience an upswing after the crisis.
The financing environment for social entrepreneurs does not make it easy, but impact investors want to collaborate together in the future to accelerate the pace of investment and make investments more transparent through impact measurements. Information about pipelines or due diligence processes should be exchanged in ways that it has not before.
Getting away from isolated operations and lack of transparency
The Global Impact Investing Network, or GIIN for short, recently launched the "Response, Recovery and Resilience Investment Coalition" to streamline impact investing efforts and address the social and economic impact of the pandemic. This coalition will connect investors and highlight investment opportunities, help fill financing gaps, and quickly deploy existing capital. Transparency should be increased for trusting and meaningful relationships to be built.
Impact investing was growing and becoming more and more mainstream before the pandemic, but how COVID-19 will affect this growth and efforts to standardize and measure is an open question.
Opportunity for growth through collaboration and cooperation?
Amit Bouri, CEO of GIIN is of the opinion, that this crisis will have a profound impact on economic development in general, particularly how we think about companies and investments in society and the planet. Further more he thinks that a big mandate coming out of this is thinking about what is the purpose of our money. And Ronald Cohen, Chairman of the Global Impact Investment Steering Group, who has spoken out in favor of switching to a financial system, taking into account the risk, return and their impact, says: “There is an opportunity for this moment to drive major changes in the financial system. It’s going to give the Impact movement a very big push. "
Well, these words are undoubtedly medicine for my soul - it is about time to take full responsibility for (financial) economic activities and their effects.
Original article in German: Börse Social Ausgabe Juli 2020