A gift with impact

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This article was published 23/12/2023 (660 days ago), so information in it may no longer be current.

Philanthropy is a particular focus for many people at this time of year.

Yet impact investing is another way for our dollars to bring about the change we’d like to see in the world—and perhaps turn a profit at the same time.

A subset of responsible investing, impact investments generally involve buying stakes in up-and-coming companies that, besides seeking to become profitable, are producing goods and services tackling social, environmental and economic problems.

According to the Global Impact Investing Network, investors put about US$1.2 trillion into impact investments in 2022, crossing the US$1-trillion mark for the first time.

It’s popular in Canada too, accounting for about $14 billion worth of capital in 2022, according to the Responsible Investment Association of Canada.

Especially prevalent among ultra-high-net-worth families, most impact investments involve companies yet to be traded on a stock exchange with access typically through specialized funds.

That includes Spring Impact Capital in Vancouver, which recently launched a $20-million venture fund seeking to invest in early-stage health and climate companies from under-represented communities, led by under-represented founders.

“There is lots of funding for people in Vancouver, Toronto and Calgary, but getting into other centres, having access to capital at the right time is a little bit harder to achieve,” says Keith Ippel, founder and co-chief executive officer of Spring.

Among those targeted markets is Winnipeg, he adds.

“We have supported entrepreneurs from Manitoba in our past programs, but this fund has just launched so we’re looking at our first deals just now.”

He adds Spring has worked with Social Entrepreneurship Enclave in Manitoba before, which supports local entrepreneurs’ ventures in social innovation.

In the business for about 10 years, Spring has invested more than 900 investors’ capital in more than 2,000 entrepreneurs in Canada.

Typically, there is no shortage of entrepreneurial Canadians with good ideas to fight climate change or poverty, but investors can be more challenging to find.

One reason is most must be accredited, which means they require, for example, a minimum annual net income of $200,000, or have investable assets worth at least $1 million.

In other words, impact investing can be tough to access for many people, says Patti Dolan, a responsible investment adviser with the Wagner Investment Management Team at Wellington-Altus Private Wealth in Calgary.

“Foundations are probably among the most common impact investors,” she says, given these organizations have enough investable assets to allocate small but not insignificant sums into a diversified portfolio of impact investments.

Dolan — like many responsible investment advisers — is licensed to help her clients invest in stocks, bonds and exchange-traded funds. She is not licensed to provide access to impact investments, which are part of the private markets.

Yet investors with the financial heft, and work with an advisor who can provide access to private markets, have a fast-expanding world of impact investments to choose from, including those from the Impact Investment Exchange (IIX).

It operates the Orange Bond Initiative that supports women’s rights and economic development in the Global South through its Women’s Catalyst Fund among others.

IIX founder Durreen Shahnaz says the fund seeks to close a US$1.7-trillion gender financing gap for women in developing economies.

“Impact investing isn’t just a feel-good or an altruistic choice; it’s a smart financial decision with tangible positive returns,” says Shahnaz, based in Singapore.

The author of The Defiant Optimist: Daring to Fight Global Inequality, Reinvent Finance, and Invest in Women points to IIX’s Women’s Livelihood Bond series that has more than US$128 million in assets and “has seen no losses.”

And the growth potential of investing in global gender equality is undoubtedly an untapped “powerful economic engine,” Shahnaz adds.

“We’re really talking about unlocking the full potential of half the world’s population.”

That’s about US$28 trillion in economic activity, she further notes.

While IIX aims to help women in the developing world, Spring aims to generate economic development springing from bright ideas to change the world from Canadian women founders and other under-represented groups in capital markets, including BIPOC and gender diverse individuals, Ippel says.

Spring will initially invest as much as $500,000 in a prospective company with additional financial support as the enterprise grows. But as venture investors, they become owners, providing expertise and mentorship, Ippel says.

Previously, Spring has invested in and helped firms like Open Ocean Robotics in Victoria produce and market solar-powered drone boats that monitor the oceans. Another is VoxCell BioInnovation, which 3D prints human tissues for drug development.

While innately high-risk as early-stage companies, impact investors consider these wagers worthwhile, nonetheless, Ippel says.

“As with any investment, you’re looking for a return on your capital, but you are choosing to invest in companies that are intentionally trying to make the world a better place through a combination of what they do and how they do it.”