Environmental, social, and governance-focused businesses are increasingly cropping up in response to the growing demand for ESG focused products. Millennials are increasingly looking for investment products that guarantee returns and offer solutions to ESG issues. Likewise, Impact investing services have cropped up, intending to help investors’ direct capital to investments that rhyme with their investment goals in matters returns and solving societal issues.
While impact investors do provide the much-needed capital that allows ESG businesses to scale, there are things most of them are fond of looking at before investing. Impact investors don’t fund all types of ESG enterprises just for the sake. Instead, they first analyze their targets, objectives, and risk profile before putting any capital into use in prospective sustainable investments.
Many early stages businesses and entrepreneurs remain unclear on what impact investors look for when it comes to capital allocation. However, by leveraging impact investing services offered by The Altruist League’s likes, ESG enterprises and businesses would always be on the right track in securing the much-needed financing needed to scale up operations.
Below are some of the impact investing trends, as shared by some of the biggest impact investing consultants:
Any entrepreneur or business eyeing impact investors’ capital should be investment ready. In this case, the company or investor should be ready to meet impact investors’ specific needs and expectations on returns and impact.
According to most impact investment consultants, many impact investors cherish projects and businesses that have a demonstrable social and environmental impact as the primary concern. Likewise, impact investors will only invest in businesses that have generated significant revenues over their lifetime, conversely demonstrating product-market fit.
In addition to revenue generation, the businesses should have addressed several ESG issues that conversely improve the human race’s living standards.
Sharing similar sentiments of an investable ESG focused business or project is The Altruist League’s Managing partner Ekaterina Chernova “the clear vision, strategy for growth and business plan should be feasible, clearly articulated and backed by the investment plan,”
Viable Business Plan And Management Team
A viable business plan and management are the heart and soul of any successful business. Similarly, impact investors pay close watch to a business plan and management team before making an investment decision. In this case, the business should have a capable management team that can implement a business strategy and solves problems.
According to The Altruist League President Milos Maricic, financial reporting is essential.“ Finances should be managed appropriately transparent and ideally audited. Likewise, such businesses or projects should have realistic and achievable forecasts that not only point to solid returns but the potential impact on ESG issues.”
Another trend in impact investing that impact investors pay close watch to be values that drive management and company. Investors are increasingly analyzing what entrepreneurs hold dear and true to them. Do the managers attract top talent? Are they willing to be transparent? Those are some of the questions commonly asked.
Market Size and Potential
While impact investing presents a $250 billion opportunity, entrepreneurs must show their idea has the potential to capture a substantial amount of the market share to secure much-needed financing from impact investors.
According to impact investing consultants, businesses and entrepreneurs must prove to investors that their idea is highly scalable and with sufficient capital would generate significant returns in the future. While generating returns, the idea should continue to address some of the societal issues that the community faces in addition to environmental or governance issues.
Impact investing statistics show that a good chunk of impact investing capital is flowing into businesses that are not only adaptable but effective in managing and mitigating risks conversely, generate higher returns.
Impact investors are also increasingly investing in programs and projects that rhyme with emerging market trends. For starters, environmental impact investing is growing in prominence, given the tremendous investment opportunities up for grabs in conserving the environment.
Capital inflows are on the rise in projects focused on renewable energy, such as solar and wind energy firms. Likewise, Impact investing services are increasingly directing impact investors’ capital into projects focused on alleviating poverty and providing affordable housing to alleviate homelessness.