Higher, faster, further — that was once the case. For many decades, our financial markets were geared to radical profit growth. Without regard for losses. Or rather, collateral damage to society as a whole was tolerated. The main thing was to fill the bank account.
Today, more and more people are divesting themselves of shares, bonds or investment funds that are unecological or ethically questionable. A growing sense of responsibility is giving rise to a new consumer culture. Growth is being redefined as a mixture of economy, ecology and social commitment. Innovative approaches are emerging — so-called impact investings. But what is that actually?
Impact investing — what is it?
Investors are no longer only concerned with the return on their investment. It is becoming increasingly important for them to know and understand what happens to their money and what effects their investments may have. A current example: Can we reconcile it with our conscience if the environment is harmed for the sake of a good return? Hardly!
The idea of impact investing is that investors invest sustainably and earn money with it. Financial gain is no longer the only investment goal. The benefit for society plays an important role. In this way, financial resources are specifically directed to where they are needed to make the world a little more livable.
The Global Impact Investing Network platform tells how this should work:
Impact investing involves collecting money from investors — for projects selected according to specific criteria. The investors not only receive interest on the investment and their money back but also create an additional benefit — for the climate, for example. Regular reports provide information on the actual measurable benefit (a key criterion in impact investing) created by the project.
A good feeling coupled with real additional benefits is therefore an important factor in the attractiveness of an investment. Investors are more enlightened and informed than ever before (long live digitalization!) — and that’s where it gets difficult. How do we manage the flood of data? How do we recognize misinformation? Where does greenwashing end and real sustainability begin?
How does this sustainability work?
We need to understand what “sustainability” actually is. Only then can we formulate guidelines for sustainable action and sustainable investment.
The three pillars of sustainability are:
In addition to the conscious use of the environment and natural resources, it is therefore also important to focus on people and to create social justice. Economic sustainability requires companies to behave in a way that does not harm future generations. So far, so good.
And the question still remains: What is sustainable and what is not?
This is where policymakers are currently trying to create more selectivity. The so-called EU taxonomy is supposed to provide a uniform definition of “sustainable investments.” The result is well known. We do not want to discuss here whether gas and nuclear energy should really be considered sustainable under certain conditions. We also leave uncommented the aspiration of the arms industry to be classified as sustainable (among other things because of its contribution to security and peace). Let’s focus on Wattify!
And what does Wattify actually say about this?
We cannot take the complexity out of global financial markets or world politics.
But we can make a (small) contribution.
We are convinced that private funds must flow into new, sustainable companies, projects and services. This is how projects and innovations are financed that might not have received funding from large investors.
We are democratizing the energy transition and meeting the challenges of climate change. And the desire in society to do just that is great.
For us, impact investing means:
We shift the balance of power from a few big players to many who can have a say and earn a share. Through their small and large investments in a crowd investing, we minimize the risk for individuals.
We disclose everything: Investor:s can track what happens with their money at any time: We make generated energy, avoided CO2 emissions and the current return directly visible. We also achieve this by cutting out middlemen. This allows us not only to reduce costs, but also to disclose fee structures and, in short, to create transparency.
Share, Care & Change
The realization that sustainable investments are not at odds with returns and do not have to be accompanied by higher fees is the first step toward reviewing one’s own portfolio. But selecting suitable investments with a focus on their (sustainable) impact is not easy.
The term “impact investing” is not protected and — just like the term sustainability — is used in very different ways. What is important here is the highest possible level of transparency. The more directly an investment can be made, the better. For investors: the more possibilities there are to take the investment into their own hands and to control the risk diversification themselves, the more they should consider this possibility.
Being able to manage the respective investments themselves, while active funds cost fees and ETFs are often not very strict when it comes to sustainability criteria, puts the crown on impact investment. Those who can directly enter and participate in sustainable projects, startups and innovators are preparing for the future.