Impact Investing

How To Become an Accredited Investor

First, what is impact investing? Impact investing refers to investments made into companies, organizations, or funds with the intention of generating a positive social outcome or environmental impact. Such investments and investors not only leave the communities in which they invest in better shape, but they also realize financial gain. Impact investing firms can help investors with little or no experience make a difference in the communities in which they live and work, and beyond.

According to the 2017 Annual Impact Investor Survey, respondents reported managing $114 billion in impact investing assets. Institutional Real Estate, Inc., a global media firm for sharing industry insights, notes that

“Although the potential for making a social impact was a considerable driving factor in this increase, more than half of the investors surveyed noted they are investing for risk-adjusted, market-rate returns and are finding impact investments consistently meet, and even exceed, their financial expectations. As a result, major institutions such as pension funds, endowments and foundations are increasing their allocations to impact investment funds, with the understanding social change need not be at the expense of financial returns. Rather, social impact investing serves as a proven model for generating profit.”

Impact investing not only offers tangible good within the community, but for savvy investors, increasing their impact investing is yet another smart way to diversify their investment portfolios with assets that are protected against certain economic vulnerabilities. Put another way, while market-rate housing can be subject to the whims of the housing market, affordable housing, for example, is insulated from these potentially volatile ups-and-downs.  

What are the Core Characteristics of Impact Investing?

According to the Global Impact Investing Network, some of the core characteristics of impact investing are:

  • Intentional: Individuals who choose to invest in this manner have a clear desire to make a positive social or environmental impact.

  • Investment with Return Expectations: Unlike making a donation to a nonprofit organization, investors expect to generate return on capital (or, at the very least, break even).

  • Range of Return Expectations and Asset Classes: Impact investments target financial returns that range from below market to risk-adjusted market rate, and can be made across asset classes, including but not limited to cash equivalents, fixed income, venture capital, and private equity.

  • Impact Measurement: Measuring and reporting the social or environmental impact of an investment is another hallmark of impact investing. This practice can even improve the financial performance of investments and influence a company’s future investment decisions by helping companies better understand their customers and their needs.

Why is Impact Investing Good for Business?

“[Impact Investing] not only increases a company’s economic results, but it also indirectly influences its long-term viability” (Forbes). By using data collected as part of the impact measurement process, companies can improve day-to-day fiscal operations and foster a more worker-friendly environment. Companies can also increase financial growth by better understanding what drives their consumers or getting a clearer picture of what their clients need. The better a company understand its customers, the better able they are to market their products or services.

Who Are Impact Investors?

While we’ve spent some time focusing on institutional impact investors, anyone can be an impact investor. If you’re looking to make a difference, you can be an impact investor. Some individuals choose to invest with equity management companies while others opt to invest on their own. Impact investors represent a range of individual and institutional investors and can include private investors, for-profit or nonprofit fund managers, private foundations, NGOs, religious institutions, financial management companies, real estate equity firms, and more.

In our case, here at Canopy South, we’re not strictly an impact investing company; however, we believe in making a difference and we proudly engage in lending, investing, and developing real estate-related projects that make a positive impact on the greater Nashville community. In other words, many of our investments are impact investments. While we have several exciting projects in process, two of our recently completed investments were affordable housing renovations in which Canopy South, our investors, the developer, and tenants all benefited.

Enjoying impressive returns while doing good in your community are not mutually exclusive. Impact investing is a way in which investors can address societal needs while generating solid, risk-adjusted returns.

If you’re looking to make a difference and would like to learn more about impact investing, contact Canopy South Capital Management.

Horton Admin