Zurich – Growing your own wealth with a clear conscience – this prospect thrilled many investors. “Impact investing” is the name of the game where money is invested in a way that does good for the world. In Germany, the movement is slowly gaining momentum, elsewhere, the big names in the financial world have long been part of the trend.
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A pineapple factory in Costa Rica: To create jobs in a poor region and to increase quality, the family-owned company Dilifrost wants to buy its own plantation. A case for investors who want to do good as well as yield. Another example: In Egypt, the private education provider Cira promises families in addition to the ailing state education a good education for children at affordable prices. The demand is huge, the operator needs money to expand.
Not the same as “ethical investments”
In both cases, client funds from Switzerland’s largest bank, UBS, provide relief. It already has 2.5 billion Swiss francs (about 2.3 billion euros) in such investments, and in the next five years, another 4.4 billion euros to be added. “We believe that ‘impact investing’ will be one of the best investment opportunities over the next 20 years,” said Mark Haefele of UBS Asset Management.
“Impact Investing” is the name of this investment, impact-oriented investing in German. It’s not about long known “ethical investments”, those that do not invest in defense companies or companies that are suspected of destroying the environment or exploiting people in developing countries. In “impact investing”, funds are used exclusively in companies that have the purpose of solving social, social or environmental problems. Not only in developing countries. Affordable housing in European metropolitan areas, job initiatives in abandoned coal cities in the US are also included.
Enormous growth rates for “impact investments”
The Rockefeller Foundation coined the term 2007. This market is already booming in the USA. The Global Impact Investing Network (GIIN), a network of environmentally and socially motivated investors, estimates its global assets at $ 144 billion. Compared to the total amount of managed investments, the Peanuts are: The sum is estimated to be 500 times, about 75 trillion dollars (75 000 000 000 000). But the growth rate is 47 percent within a year. Since 2013, plus 1300 percent.
Three factors favor the trend
Katherine Brown deals with sustainable investments at the foundation World Economic Forum. “Three factors spur trends,” she says: “The Millennials, the United Nations Sustainable Development Goals – the SDGs -, and the Volatility of the Short-Term Investment Market.” Millennials – people born between 1980 and 2000 – demanded such facilities. The UN goals that came into force in 2016 – such as ending poverty, education for all, decent work – are clear guidelines for action.
There is no real boom in Germany yet
In Germany, impact-oriented investing is only just beginning. After all, according to a study by the Bertelsmann Foundation from 2012 to the end of 2015, the volume has tripled to about 70 million euros. The Germans are generally stock-shy, says Wolfgang Zirus, a professor at the Munich Business School, a private college of economics. “Such a vehicle is rather alien to them.” He does not recognize a boom yet. Intermediaries such as specialized fund managers and rating agencies rating such funds were also missing state initiatives.
Two major specialist fund managers are Ananda Ventures and BonVenture. Among other things, the Deutsche Bank is active: “The interest of investors in such sustainability and impact funds, which make a contribution to the UN-defined SDGs, is growing rapidly,” it says. They are investing 1.6 billion euros in eight funds that promote UN goals. Swiss Credit Suisse reports just under three billion euros in “Impact Investments”.
Sticking point, so Brown, is determining the successes. “How do you measure the effect?” Standards are being worked on. In a GIIN survey, 98 percent of surveyed investors said their performance expectations had been exceeded. 91 percent also earned more money than expected.