If you are looking for information about different sustainable investments, you’ll come across the term Impact Investment. Those investments promise not only financial returns, but a positive environmental and social impact as well. In addition to the trend towards Divestment, Impact Investments offer the investor an additional alternative to promote ecological or social action.
But how is the concept of Impact Investments implemented and does it have the potential to mobilize private capital for the protection of forest and biodiversity? OroVerde – The Tropical Forest Foundation and Global Nature Fund try to find answers to these questions in this project funded by BMUB/BfN.
The concept of Impact Investment and in particular its social and environmental impacts will be analyzed with the application of case study methods. The contribution to forest and biodiversity conservation of five different Impact Investments will be estimated by on-site surveys and the help of a criteria's catalogue. In addition to the evaluation of social and environmental effects, an economic analysis of the investments will be part of the project.
The projects aim is to elaborate on recommendations of action for Impact Investments in forest and biodiversity protection adressing consumers, investors, financial institutions and politics. The aquired recommendations will be published and spread through different media. As a resume of the collected results, a 24-page final report has been published.
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When do you rank an investment among impact investments? In many cases, the funds engaged in Impact Investment claim themselves as such. The ranking among Impact Investments is not based on the actual impact achieved but mainly on the choice of funded projects that is made. In technical jargon, this is referred to as “due diligence process”, in which ecological and social standards, such as certain certifications, are set and have to be met by the borrowing organization or capital recipient. In this way, the ecological and social impact of the investments has been presumed but not yet proven until now.
This is one of the numerous findings of the case studies and expert interviews summarized in the final study. The study about Impact Investment is particularly useful for investors, financial institutions and government institutions. Download free pdf now.
Impact Investment is a new but rapidly growing market. This is a welcome development because Impact Investments present an alternative to classical capital investment products and investors are being made aware of sustainability issues. The Impact Investments which were investigated are pioneers in the field of investment for forest and biodiversity conservation. They provide the opportunity for involving the private sector in nature conservation. Based on the findings, policy recommendations were made.
With the aim of providing a large overview, projects from sectors as diverse as possible were chosen, such as ecotourism, sustainable forestry or investments into agroforestry systems.
The results show that investors usually choose to invest in existing projects rather than new start-ups. Currently, a return comparable to traditional financial investments is not compatible with impact investments in nature conservation and the protection of biodiversity in particular. It is particularly interesting to note that an increasing number of investors are concerned about the impact of their investment. In the area of biodiversity conservation, there are currently only a few investible projects that can meet investors’ expectations.
May, the 1st of 2015 until May, the 30th of 2017
The German Federal Agency for Nature Conservation (BfN) and the Federal Ministry for Environment, Nature Conservation, Building and Nuclear Safety (BMUB).