Socially conscious investing is on the rise, with 2020 seeing an increased interest in stakeholder capitalism. Stakeholder capitalism is an approach taken by businesses, where the focus is no longer purely on maximising profits and enhancing shareholder value, but rather serving the interests of all stakeholders, including customers, suppliers, employees and local communities. As well as being an ethical choice, stakeholder capitalism is seen as being beneficial to the long-term health and value of the business. This shift has largely been fueled by issues such as the climate crisis, rising inequality and the call for businesses to take social and environmental responsibility.
Impact investments - investments that contribute to social and environmental solutions - enable investors to make values-based investment decisions and receive a social return, as well as a financial one. Impact investments attract a variety of investors (including individuals, philanthropists, institutions, and governments) and can provide an additional financing option to advance social and environmental solutions.
Impact investment growth here in Aotearoa, New Zealand, has seen the establishment of an Impact Investing Network. Aimed at enabling connectivity, education, coherence and investment, the Network is responsible for coordinating relevant parties in order to foster impact market development and activity. Impact investment funds have also been established in sectors such as clean energy, agritech, education, sustainable food production, and healthcare.
Measuring your social and environmental impact has become an increasingly important exercise, as the expectation for corporate social responsibility from investors and stakeholders has also increased. While it can be difficult to measure and report your impact and there is debate as to the best way to do it, integrated reporting is starting to be adopted by some New Zealand companies. This reflects a move away from reporting on purely financial metrics to a more holistic approach to corporate reporting. Integrated reporting involves an acknowledgement that companies use resources other than just financial capital, and can generate returns other than just financial ones, in order to create value over time.
Alongside integrated reporting, there has also been a shift towards covering the four capitals of the Treasury’s Living Standards Framework on what matters for New Zealanders’ wellbeing. These include physical/financial, natural, human and social capital. Including them in your reporting ensures consideration is taken towards the cares and concerns of all stakeholders, as well as your shareholders’. However, for projects with a significant focus on social or environmental impact, sometimes a more bespoke impact framework is needed. The real question is always: “How can we show that we’re achieving the outcomes we are aiming for?”
Are you a business considering the impact investment market? Catalist is a great solution for social enterprises and businesses seeking capital. Impact investing can be a win-win for social impact businesses and for investors, with wider benefits for our communities. Even for businesses that don’t consider themselves to be focused on social impact, taking a values-based approach can be good for financial returns, with most investors believing environmental, social and governance factors are a strong driver of long-term financial performance. Get in touch with us today to chat about how Catalist can help.
For investors who are interested in the impact investment market, Catalist will enable you to have direct access to impact investments, which will be clearly distinguishable from other investments on our platform. If you would like more information, sign up for a Catalist account and make sure you opt in for our newsletter. We’ll let you know when we have impact investments available.
By Michelle Polglase