We cannot compartmentalize the financial decisions from our other daily activities. If we intend to live a purpose-driven life, we must not delegate the one area that might have the biggest impact after all: money. Where we invest has significant consequences. Money does make the world go round, which means placing it in a brittle financial system that increases disparity and planetary exploitation cannot be part of our intention. Instead, mobilizing capital to flow towards meaningful endeavours is a step in the direction of a new system where economic activity is brought back into balance with humanity and planet.
Intention is a powerful thing. It gives direction and order to our lives, it provides us with resolve. But it requires an organizing principle. We are aligning our intention along two dimensions: financial sustainability and measurable impact.
Financially we seek to preserve and grow capital in order to act as investors in perpetuity. Positive impact should not be the result of philanthropy only, but stem from the economic activity of purpose-driven individuals and organizations. It should not be seen as a one-time donation (although in some cases that might be required and sensible), but as a benevolent use of capital in order to activate the strength of economic cooperation. It should be possible through a variety of vehicles (loans, bonds, equity, etc) and across asset classes.
In order to achieve impact, investments must be focused and measured. As a framework, we have chosen the United Nations Sustainable Development Goals for 2030 to provide a framework for impact themes, targets and metrics. Specifically, SDG 6 (Clean water and sanitation), SDG 7 (Affordable and clean energy), SDG 12 (Responsible consumption and production), SDG 13 (Climate action) and SDG 15 (Life on Land) are our focus.
To be actionable as impact investor, you need solid structure and process in place. We have chosen to form a holding entity for all our impact investments, as it lets us track financial performance over time for a well-defined portfolio.
In our portfolio, we seek to balance risk profiles, return expectations, durations and liquidity and, of course, level of impact. On the impact spectrum, you can start with responsible investments respecting Environmental, Social and Governance (ESG) screening criteria to avoid harm. To support specific causes, thematic investments can be made for near-market return. Lastly, you may chose to place impact first and decide to forego financial return for deeper impact. A good impact portfolio balances all of these strategies.
Impact investment goes beyond philanthropy by setting clearly defined impact goals up front and monitoring the achievement of the goals with transparent metrics. Instead of giving grants and hoping for the best, impact entrepreneurs have clear goals they are expected to achieve. This clarity supports a focused dialogue and supportive relationship between the provider and the receiver of funds.
Several frameworks of useful metrics are becoming more widely adopted. For example, the IRIS catalog by GIIN can help investors structure their portfolio impact metrics.
It is our hope that using capital as a means to achieve social or environmental impact will become the standard way of investing - for everyone. Today, financial risk and return are familiar decision criteria, but positive or negative impact of investments are not. In order to change that, we seek to help build a community of like-minded people and organisations that define the best practices, establishing a robust methodology for such investments that others can use. A good example are leading communities such as Toniic, which we are a proud member of.
We seek to openly document our journey of impact investing, the good, the bad and the ugly. We are very interested to engage with anyone who is moving into this field. Together we can change how our financial systems operate and "make money do more".