What is important with impact investing?

The momentum for impact investing has arrived as an increasing number of investors seek to earn a financial return and, at the same time, generate positive social and environmental impact through their portfolios. Over the past two years, there has been a notable growth in impact companies. The number of startups that have reached a value of $1B or more in this field has exceeded 150. The areas where these initiatives mainly focus on are climate, health, education, and agriculture.

Impact investing aims to create a measurable positive social or environmental impact, as well as a financial return is expected. They must address the UN Sustainable Development Goals and have them as an intrinsic and non-negotiable part of their business model.

For example, they may invest in lowering carbon emissions, creating more clean energy sources, creating more jobs, or reducing hunger. But what do investors need to bet on a company with a social or environmental purpose?

# 1 Benefits are still the priority

Quite simply: financial performance is a priority for investors. They expect to achieve similar returns through their impact fund investments as they do with the rest. Some even believe that an impact lens provides them with a competitive advantage. That can be true, but not in all cases.

Make sure you have a clear explanation of how you are going to get benefits from your company. Most of the time, you will be answering questions about this topic.?

# 2 Trust is a must

The promise of doing good for the planet and earning money with it makes them more skeptical than before (which was a lot already). With impact investments, there is an enhanced expectation of trust that goes beyond the typical fiduciary relationship.

Also, some partners see impact investing as an approach based on their values. In other words, it has a personal meaning for them, so emotions are involved, and your capability to make them feel comfortable with your project will be essential in this case.

# 3 Measure it correctly

Both your impact on the planet and how you get revenues. Even if you obtain the financing you were looking for, to maintain it in the next round, they will ask you for the numbers that support their trust. The scalability of impact investing in private equity will depend on the ability of founders to earn trust, and there is nothing more effective than good figures, together with being transparent and authentic.

I leave you at the bottom a recent list of 100 impact startups chosen by the Swedish impact VC and coworking space Norrsken so that you can have an idea of what they are looking for. For example, there is the Lithuanian secondhand marketplace Vinted. That’s the sort of impact company they believe in. Or another example is Founderone - the first impact fund in Turkey. Please check them out.?Impact investing is coming up everywhere!

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