Impact Investing: Where Profit Meets Planet

For decades, the dominant financial paradigm has presented sustainability and profitability as opposing goals. Central to this view, is that achieving financial gains requires environmental  compromise - indeed this perspective has fuelled our unsustainable and extractive history.

But things are starting to change.

The advantages of impact and sustainable investing are becoming more apparent. Companies and investors are identifying the costs imposed by the climate crisis and the variety of opportunities emerging across clean energy, carbon removal and climate tech sectors.

A shift is happening; proving that environmental responsibility and financial success can coexist - and do so at scale.

Introducing Regenerative Finance: from extraction to renewal

Regenerative finance (ReFi) offers a viable alternative to the traditional economic model; beholding an expansive mindset, that requires us to re-think the way we coordinate and value our resources.

The fundamental idea within ReFi is that; economic systems should not be treated solely as a means to profit, and in isolation of social and environmental impact. Rather, that economic systems should be a means to secure long-term value and replenish the very resources draws from.

It not about sacrificing profit, but rather potentiating all parts of the system.

As we approach the 1.5°C global warming limit, witness wildlife biodiversity decline 69% since 1970¹ and cross 6 out of the 8 planetary boundaries for earth stability²  - we must question the systems that we operate with.

The traditional economic model tend to harm ecosystems and communities by depleting finite resources in the name of short term benefits. Regenerative systems, seek to increase total resource capacity, aiming to secure abundance in the longterm and improve the ability to respond to and recover from shocks.

A wider value chain, a longer timeline and integrated approach is what ReFi calls for.

Introducing the UN's Sustainable Development Goals

The UN's Sustainable Development Goals (SDGs) are an agenda set for 2030, adopted by all United Nations members in 2015. These goals aim to create "peace and prosperity", while tackling climate change.

Regenerative finance is often associated with the SDGs, in that they offer a framework to guide investment strategies, so capital can potentiate environmental health and global resilience.

With this lens capital can be directed towards systematically reducing carbon emissions, increase planetary biodiversity and mobilising marginalised people.

Emerging Opportunities in Impact Investing

The Impact investing industry demonstrates a lot of economic potential; now exceeding $1.2 trillion and showing steady growth year-on-year over the last decade. Projections show an 18% CAGR (compound annual growth rate) until 2030.

Formidable institutional investors like Black Rock, Mastercard and the Bill & Melinda Gates Strategic Investment Fund, have all established a clear ecological and social agenda through their dedicated impact funds.

More so, this growth and investment is being consolidated by younger generations, notably Gen Z and Millennials consuming with a new set of ideals; prioritising zero pollution consumables and willing to pay a premium. As these generations grow in purchasing power and wealth, a wide space is opening up the for growth across multiple impact sectors.

Here’s an overview of some key sectors where impact investing is thriving:

Green Infrastructure Investments

Sub sectors:

• ESG real estate, sustainable construction, heating & insulation systems, energy-saving technologies, green roofs, sustainable water management.

Purpose:

• Household consumption; energy used to heat, cool and light buildings accounts for 28% of all global carbon emissions.³
• Materials and constructions generate a further 11%.⁴

Highlight Opportunity:

• Property & real estate remain a cornerstone asset.
• Notable ESG real estate funds such as, GIM Real Estate expect a 12-14% yield.⁵

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Renewable Energy Investments

Sub sectors:

• Solar, wind, hydropower, bio fuel, geothermal, EV development.

Purpose:

• Renewable energy sources do not produce carbon emissions in the generation process.
• They harness the natural energy from the sun and the weather.

Highlight Opportunity:

• Global investments in clean energy will exceed $1.7 trillion, outpacing the $1 trillion spent on fossil fuels.⁶
• We are witnessing the highest spend on clean energy ever.

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Low Carbon Investments

Sub sectors:

• Energy-saving devices, industrial efficiency, carbon capture technologies and biodiversity credits.

Purpose:

• On the one hand, generating cost savings through efficiency
• The IEA reports that investments in energy efficiency could yield savings of $500 billion annually by 2030.
• On the other hand reducing atmospheric carbon; via sequestration tech and ecosystem management.

Opportunity:

• The Carbon capture market grew to reach $6.4 billion last year.⁷
• The UK government confirmed investing $20bn over the next 20 years into carbon capture.⁸
• Exciting carbon capture start-ups, such as RepAir are now able to extract carbon 70% cheaper than original methods, reducing a big cost barrier.⁹

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Sustainable Agriculture

Sub sectors:

• Sustainable agriculture practices, permaculture, organic farming, sustainable aquaculture.

Purpose:

• Contributing to food security and environmental health.
• Enhances soil fertility, reduce chemical use and fosters more resilient agricultural systems.

Opportunity:

• The sustainable food market was valued at $1 trillion in 2023.¹⁰
• Projected to reach $1.9 trillion by 2032.¹¹
• Consumer demand soaring driven by a greater purchasing power of in gen z and millennials.

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Water and Sanitation

Sub sectors:

• Clean water, desalination, sanitation and filtration

‍Purpose:

• Safe and easily available water is critical for public health, whether for drinking, household use or food production.
• Improved water supply and sanitation have proven to increase a country's economic growth and reduce poverty.

Opportunity:

• According to the World Health Organization, every $1 invested in this sector yields a $4.3 return through reduced healthcare costs and increased productivity. ¹²
• Governments and organisations are recognising the need to allocate budgets to clean water technologies, providing a solid context for investment opportunities.

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Summary & Closing Thoughts

The emergence of impact investing and regenerative finance is decisively dispelling the idea that business and the environment are incompatible. Investors can reap significant financial rewards while promoting social and environmental renewal - this requires shifting from extractive strategies and adopting sustainable development objectives.

Green infrastructure, renewable energy, low carbon technology, sustainable agriculture, and clean water initiatives offer several appealing opportunities and the potential for profit and plant to come together.

Embracing this new financial paradigm is key to paving the way and ultimately securing a more sustainable and life-expanding future.

Be part of the shift.

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