Production and consumption patterns must change and evolve rapidly to ensure that our way of life is sustainable and that humanity has a secure future. We are shaping tomorrow’s world through the actions and choices we make today. Investment is one of these choices; it must be thoughtful and enlightened. Of course, investment must have a positive effect for both parties: the investor seeking a return on his capital and the recipient, who seeks to obtain the necessary financing to carry out his project. However, there is always a third player, a third stakeholder: the external environment in which the first two parties operate. Indeed, regardless of the amount of investment or the nature of the project supported, externalities will inevitably arise. So what are the investment channels for creating positive externalities for society and environment while maintaining an optimal return on investment?
Impact investing combines philanthropy and finance through its two goals: generating financial returns and creating positive social and environmental impact. Indeed, the two main issues of the 21st century are the preservation of the environment and the establishment of a positive and harmonious social situation.
There are many areas where action is needed today to preserve the environment: we can mention mobility, energy production, or waste management. These are the areas that have the greatest impact upon the environment.
For example, mobility, which is a matter subject to debate. In recent years, many companies have taken up this major issue, some with a more global and long-term vision than others. For example, Tesla has been able to develop solutions that combine ecological use and financial performance. Thanks to technological innovations in engines and batteries — which are more efficient — the company has developed vehicles that are low-polluting to use. Paradoxically, the manufacturing of these batteries requires a large supply of lithium, a scarce resource that is often difficult to extract and has a significant carbon impact. More important than that generated by the supply of resources for the production of internal combustion vehicles.
Tesla has nevertheless generated profits and thus rewarded its employees, partners, and shareholders by combining long-term vision and optimal profitability.
Energy production is closely linked to environmental protection. Innovative solutions have been developed through institutional financing in tidal turbines using ocean currents to create energy. These projects are financed by European FEDER funds. These solutions enable us to move closer to energy production that respects natural equilibrium.
Management of forest resources is a key issue for environment. Forests, in addition to being the lungs of our planet, produce resources that are indispensable to mankind. In order to ensure the management of these areas, it is necessary to develop sustainable and responsible agroforestry. It must capitalize on the forest resources acquired by optimizing them so that they are preserved for future generations. They will thus be able to enjoy the benefits when the time comes.
Then, areas that can have a positive impact on the social situation of a population are very broad, they can be health, housing, education, etc.
Housing has been identified as one of the key factors in the development of a geographical area. Financing the construction of social housing, or low-energy housing, through participatory fundraising campaigns, is a way to contribute to a positive impact on society. A well-housed population can then devote itself to its personal development and fulfillment.
Finally, the financial sector, sometimes decried and judged “above ground”, remains nevertheless indispensable to any nation’s life. It has taken up the challenges related to “impact investing” through the creation of green bonds issued by several companies. These bonds are important levers for financing the ecological transition. They allow companies and public entities to finance environmental projects, such as infrastructure investments. They differ from conventional bonds by providing detailed reporting on the investments they finance and the sustainability of the projects financed.
How do we know if our investments have a real social and environmental impact? How can we go beyond the short-term return logic to adopt a longer-term vision? Only transparent organisation, producing regular reporting and clear guidelines, can meet investment commitments with a real positive impact on society.
In a forthcoming article, we will find out who are the players and how they can be financed to achieve environmental, social and governance (ESG) objectives.