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Growing importance of impact investing

Uncategorized Sep 04, 2020

As part of the search for new and interesting assets classes, impact investing increasingly comes into the fray…, although many people argue that all investments are impact investments, as any investment will have an impact (be it good or bad) on society and / or the environment. Particularly NextGen representatives of modern entrepreneurial families push the case as they very often do not just want to continue into their parents’ footsteps. It is often their intention to improve the world not only by donating to charities, but also by all investments that they enter into, be they entrepreneurial social start-ups or impact investment funds. They want to intentionally create both a financial return (at least market rate or higher) and in addition a social or ecological return. This should clearly be evaluated and measured – as this is the prerequisite for effective impact investing.

The subject of impact investing is already huge in the Anglo-Saxon world with organisations like GIIN, Toniic or GSG and several very prominent entrepreneurs / billionaires very active in this space for several years and huge amounts of (private) capital employed. Also in this region, the amount of institutional capital flowing into the impact investing market is growing significantly with amounts invested up to USD 228bn according to The GIIN.

In the German-speaking countries, Europe at large and for example also in the Middle East, this subject is still relatively untapped and at least underdeveloped, if not totally intransparent. For the German-speaking world the main reasons might be the different structure and funding sources of the welfare state system. Or the lack of outspoken entrepreneurial families that are pushing the subject apart from a few exceptions like the Mohn or the Quandt families. This is in real contrast to Anglo-America where donors like Gates, Zuckerberg or Dell are publicly very present. With global economic growth, however, impact investing is certainly also slowly but surely becoming mainstream in the DACH-region as financial institutions are pushing the case. Also movements and associations like the federal initiative for impact investing (currently being founded) are spreading the “news” further to include new and additional sources of funding, particularly approaching institutional investors, but also private family capital and family offices.

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