More investors are choosing to deploy their money in ways that can lead to positive change in society while still making a return, according to Tania Carnegie of KPMG in Canada.
Carnegie works as leader and chief catalyst of the impact venture practice at KPMG, and her work helps develop strategies that allow investors to fully understand how to invest with impact.
There is no single way that investors can change the world, and no two investors would have the same motivation for wanting to bring about that change. Carnegie believes that this is a way of thinking that, while still outside the mainstream, is becoming more prevalent.
The Investing News Network (INN) spoke with Carnegie on the subject of “impact investing” to pull apart the concept, and to ask whether investors in the extractive industries can bring about change through investing in this way.
Read the full interview transcript below for Carnegie’s thoughts.
INN: Firstly, what is impact investing?
Tania Carnegie: It’s an investment approach that seeks to deliver both financial return as well as positive social or environmental impact.
One of the things that is really important is that that impact is intentional, and it’s something that’s being measured and managed throughout the investment period.
INN: So different from investing in a company that looks into green tech?
TG: Every company has the potential or realizes the potential to have positive impact, but yes, the thing that distinguishes impact investing from more traditional investing is that intentionality, and that measurement of impact alongside the financial results.
INN: How would an investor measure impact?
TG: An impact fund would have articulated its particular approach to how they think about impact and the type of impact that it’s focused on generating through the fund. It would have its own approach that would measure and monitor that.
Certainly some of the things that we’re hearing and what we’re seeing in the market is that this is something that investors are including as part of their due diligence when they’re considering making an investment in such a fund.
INN: Why are investors shifting into this?
TG: Impact investing is an approach that’s been around for decades, (and) I would say it’s really been over the past 10 years that it’s really started to pick up steam.
Some of the things that have been motivating investors — and it’ll be slightly different depending on the type of investor — is the opportunity and the recognition that there are new types of companies and commercial solutions that are really needed to ensure that we have a sustainable society going forward.
Investors are seeing opportunity in companies that, say, are really focused on delivering new approaches to healthcare or financial services, or sustainable agriculture. They’re seeing opportunities in these spaces, and this is part of what’s motivating them to invest.
INN: Can you be an impact investor, and also be investing in the extractive industries?
TG: I think given that there are different perspectives that investors bring, and impact investing is a very broad investment approach, there’s lots of opportunities for impact investors to really define the kind of things that are important to them and the kinds of things that really resonate with them when making investment decisions.
Some of the things that do motivate impact investors is really looking at solutions, looking at companies that are being very proactive with new ways of doing business, including supporting that transition to a low-carbon economy.
INN: Do you think the resources industry has changed to cater to impact investors?
TG: Impact investing has really been gaining a lot of popularity, it’s got a really strong project growth trajectory, but it’s still something that is very much moving into the mainstream as opposed to being firmly established in the mainstream investing community.
I think companies generally speaking — and this would include mining companies — are becoming more acutely aware of the kinds of things that are becoming important to their stakeholders and their shareholders.
(These are) issues that are impacting their industries and the kinds of issues that are acutely affecting the way that they operate as a company — including social license to operate.
INN: Is there a price to impact investing?
TG: When we talk about making an impact investing decision, it’s really the same process as making any other investment decision: You evaluate that opportunity based on the merits of that opportunity and how it aligns to your objectives as an investor.
One of the things that we’ve heard and we explored through the interviews to inform our report “Enlightened Capital“ was that the people that we interviewed did not feel that there was a tradeoff. They felt that there were a number of commercial opportunities that would produce the kind of returns that commercial investors were interested in under the impact investing approach.
That said, as with all types of investments, they had different risk/return profiles, and when it comes to impact investing there are some investments that may be more appropriate for patient capital or philanthropic capital or catalytic capital as opposed to commercial capital. It’s about assessing that investment opportunity based on what it’s offering.