November 23, 2016

Growing a New Economy: meet impak Finance

In the long echo of the financial crash of 2007-2008, the values we’re bringing to our financial decision making are changing. With a growing awareness that these decisions have a great influence on the economies we build and come to live in, there’s more attention being paid to how we as investors and consumers proactively shape the futures we want to see. This trend is also generational, as the Responsible Investment Association found earlier this year that Millennials (those 18-34) were twice as likely as the Baby Boomers (55+) to be interested in investments dedicated to solving social or environmental problems, a pattern repeated in country after country. Given the trillions graphicforpost1of dollars of wealth transfer anticipated in the coming years, these new values have the potential to shape the market and the economy for the better. Thankfully, the market for investments that generate a positive impact alongside a financial return is also growing, creating more channels for this investment capital to be usefully deployed in building affordable housing, helping address climate change, and building a sustainable food system among so many other goals.

In this context, Purpose Capital works to help mobilize more capital to advance social progress, working with the supply and demand sides of the market. We are an independent source of advice on impact investment strategies and products, helping our clients, who range from foundations, family offices, and other investors to develop strategies, source and assess opportunities, and measure the impact of the investments they make. Building on research and mandates to assess different markets, we are hired to help clients build the knowledge and confidence to actually make impact investments, regardless of their asset size or in-house capabilities. This investment market has continued to grow, with a reported market size of $6.42 Billion in 2015, representing 55% growth since 2013 when a common definition is used (disclaimer: we contributed data to the creation of this report). Clearly, beyond the generational transition, more and more organizations are interested in how they can see more of their money support a broader, more impactful mission.

Of course, for this market to thrive and the most impactful businesses and social enterprises to receive the investment they deserve to grow, it’s critical that this market take impact measurement seriously as information to understand whether solutions worked, and manage what we’ll do in the future. We continue to work with social enterprises and NGOs where there is a meaningful chance for our investor-centric experience to help them fill a gap in the market through a substantial new investment opportunity, something that gives us a greater ability to speak to the evolving product landscape. From this work we know that effective impact measurement will be critical to the markets credibility, as more and more products will seek to claim making a positive difference. While a set of improving tools such as the B Impact Assessment, and Impact Reporting and Investment Standards (IRIS) are being steadily adopted to enable social enterprises and their investors to speak a same language, it’s equally critical that we pay attention to what gets measured, and here there is little replacement for having a strong theory of change to clearly show the logic and assumptions of how a business will create ongoing impact as it grows. This thesis helps investors and businesses zoom in on the information that really matters in their day-to-day.

We’ve learned that the biggest concerns of investors are whether there will be the products to match; whether the channels exist for them to efficiently invest their money without the headache and risks of hands-on management (we can’t all be full-time investors!). That’s why we’re excited to see the impak Finance project launch and grow, as one example of the growing resources for easily opting into impact investing. impak Finance will be an online-enabled bank dedicated to financing projects in high-impact sectors across the country. Modelled after Triodos bank of the Netherlands and the UK, a banking institution that has survived and thrived by patiently focusing on pushing the envelope of sustainable finance, we think impak Finance would be a valuable addition to the Canadian market. By providing a financial institution where retail investors can easily move their savings and investments to create greater access to capital where it is needed, in clean energy, affordable housing, and community development among others, impak Finance will help build more assets for the real economy. Equally, by working in partnership, the bank should create the channels through which other actors can more efficiently source and co-invest in opportunities, relying on the bank to assess and price the risks of different opportunities in a way that is difficult for smaller organizations and individuals. Building on the great work of leading credit unions and fund managers, impak Finance can be an important connector and collaborator to see more projects across Canada financed and brought to life.

There’s a long road to climb to becoming a bank, and Canada has been blessed with a fairly stable system (how many entrepreneurs do you know who say they’ll start a bank!). Nonetheless, with these great ambitions, it’s not too surprising that the impak Finance crowdfunding equity campaign has inspired many to participate, and invest in the project’s beginnings. Since the launch of their campaign on October 12th, they have raised more than a million dollars and now share their project with more than 1400 shareholders across Canada, with the campaign ending on December 12th and ongoing incentives for new investors. We firmly believe the world needs more sustainable finance, and building an institution to match from day one should be welcomed. We look forward to watching this project as it continues to evolve, and working with our clients and partners, collaborating to ensure the impact economy continues to grow and thrive.