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opinion

Impact investing – a new game

But who gets to play?

But who gets to play?

Following the release of his report, Impact Investing for Everyone, James Vaccaro, head of corporate strategy at Triodos Bank argues that there is a real opportunity for money to shift into socially positive investments, but only if we are all invited to play.

It’s been described as a ‘game-changer’ and in the recent report of the G8 Social Impact Investment Taskforce, the concept was depicted as a ‘new game’ in a compelling video:

But who gets to play this game?

To date the majority of the impact investors have been institutions and ‘sophisticated’ (experienced) investors. And most of the effort for encouraging impact investment has been directed towards institutions, philanthropists, foundations and professional investors.

It makes sense in a way, since that is where a lot of money lives, and it could be put to a much more beneficial social purpose.

“Where is the movement encouraging impact investment for the masses?”

James Vaccaro, head of corporate strategy, Triodos Bank

But what about everyone else – let’s call them “normal people” (which, as it turns out, includes most people who actually work in financial services) – where is the movement encouraging impact investment for the masses?

Well, it is starting to emerge. Jamie Hartzell, founder of Ethex recently published Positive Investment, an article coinciding with their 2014 Positive Investment Report.

In it, he argues that positive investing should just be part of normal life and cites three barriers that need to be overcome to make impact investing more accessible to everyone:

  • financial education
  • balanced regulation
  • industry professionalization

Financial education is clearly the starting point. It’s no wonder that most people would feel under-confident about making a direct impact investment without feeling that they have had the education and training necessary to start becoming active.

There are very few ways that individuals can learn about the realities of impact investing without doing it.

“We’ve made a bit of a catch-22 which could end up excluding most people from something that the majority of people are interested in”

James Vaccaro, head of corporate strategy, Triodos Bank

And increasingly, regulations like the crowdfunding rules, are making it very difficult for people to start investing unless they have learned enough about it. So we’ve made a bit of a catch-22 which could end up excluding most people from something that the majority of people are interested in.

James Vaccaro Impact Investing

James Vaccaro author Impact Investing for Everyone

 

At the TBLI conference in Amsterdam we launched our paper, Impact Investing for Everyone which was prepared for the G8 Taskforce.

In it we argue that regulation needs to be balanced but also that Impact Investing needs to be integrated into the broader landscape of making investments and into the fabric of day-to-day life.

That is where professionally managed impact funds investing in, say, renewable energy projects can be very helpful in overcoming the barrier of needing to find lots of investments yourself to get enough diversification.

“We are at a crossroads – will this become a mass movement or a new game that only a select few get to play”

James Vaccaro, head of corporate strategy, Triodos Bank

The other answer is to allow impact investments to be held within standard investment products – like personal pensions – with advisors enabled to help people make choices; rather than the current practice of excluding many impact investments from the places where most people can get to make investment decisions.

There are big opportunities to make progress at the moment – the EU is introducing ELTIFs (Long Term Investment Funds) to support long-term infrastructure, much of which could be sustainability related impact investment.

But we are at a crossroads in terms of whether this becomes a mass movement for everyone or whether it is a new game that only a select few can get to play.

On the heels of the New York Climate Summit and with the help of research groups like CarbonTracker, the snowball of institutional investors currently divesting from fossil fuels is rapidly becoming an avalanche.

Once that has happened there is a real opportunity for money to shift into socially positive investments. Let’s hope that when it does, that’s something that is open to all.

James Vaccaro is head of corporate strategy, Triodos Bank

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Nick Barker 5 years ago

if my money can be invested in helping good causes and earn me some interest then thats a positive

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