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Impact Investing: Beyond Financial Performance

Maude M. Sévigny No comment

Impact investing is a movement that aims to invest with the intention of generating social and/or environmental returns, while at the same time yielding financial returns, with positive and measurable impacts.

Quebecers started to adopt this global trend a few years ago, the term having been coined in 2007, with the Finance and Sustainability Initiative (FSI), a non-profit organization based in Montréal that brings together finance professionals wishing to promote sustainable finance, and responsible investment, in particular. The business magazine Les Affaires reported that a group also launched the Institut public pour l’investissement responsable et durable (Public Institute for Responsible and Sustainable Investment).

Ecotierra is a good example of an impact investment. It defines itself as a “sustainable forestry and agroforestry project developer generating positive environmental, economic, and social impacts.” The Sherbrooke SME enables small producers in South America and Africa to convert their low-yielding deforested land into certified organic and fair-trade farms. Ecotierra also generates carbon credits, which is an additional asset. Presented to the junior members of Anges Québec (30 years old and under), Ecotierra garnered the interest of 15 investors, who must now go from intention to action.

According to Canada’s Responsible Investment Association (RIA), impact investment distinguishes itself from classic investment through three principles:

1) The intention of investors: The investors seek to allocate capital (debt, shares, or hybrid forms) in investments from which they expect a financial return (from capital repayment to above-average yields) and a clear social impact.

2) The intention of the investee: The investee’s business models (whether they are for profit or non-profit, funds, businesses, or other financial instruments) are intentionally designed to create financial and social value.

3) The measure of impacts: The investors and investees must be able to demonstrate how the intentions stated translate into measurable social impacts.

This type of investment is not limited to a specific sector; real estate, health, technology, employment assistance services, and manufacturing, can all be choices for impact investors.

Sources: Les Affaires, Association de l’investissement responsable du Canada, Initiative pour la finance durable (IFD) and Ecotierra.