Impact investing via alternative assets
Aside from the media hysteria surrounding the extraordinary rise of crypto, there have been few disruptions in the investment world recently more influential than impact investing.
Aside from the media hysteria surrounding the extraordinary rise of crypto, there have been few disruptions in the investment world recently more influential than impact investing. With the global collective recognising the need for their investments to generate positive social and environmental outcomes as well as financial returns, we are seeing a huge shift towards non-traditional, alternative assets. Here’s how impact investing via alternative assets could change the world for the better.
What is impact investing?
Impact investing is an investment strategy that goes beyond the simplistic notion of earning as much money as possible. It’s about more than just generating wealth through your investment decisions. Instead, it’s a considered strategy that factors in the potential social, health and environmental impact of different assets.
It recognises that in the absence of individual and community wellness and a sustainable natural environment, the value of monetary wealth is severely compromised.
What we are seeing across the impact-investing market is investors with a very clear goal of supporting organisations and initiatives that are working to address major challenges on a global scale.
Sustainability, egalitarianism and social cohesion are now being prioritised alongside financial returns in a way that has been the exception rather than the rule for traditional capital markets.
How alternative assets factor into impact investing
Impact investing can take many forms — from investing in private and public companies, real estate projects, or funds that support specific initiatives or causes. But where impact investing as a strategy really has the potential to make a difference on the global stage is through alternative assets.
Alternative investment vehicles can include private equity, venture capital, private debt, real estate, infrastructure and more. Until recently, alternative assets were less accessible to the general public compared to more traditional asset classes like stocks and bonds — but VentureCrowd is turning that reality on its head.
Everyone from everyday retail investors right through to ultra-high-net-worth individuals can take advantage of potentially lucrative, but always impactful, early-stage investment opportunities via the platform’s equity crowdfunding framework. Steve Maarbani, CEO and Founder of VentureCrowd, says the platform has funded some of the most exciting social, environmental and health startups out there.
“In the food tech space, we have funded a company called Nexba many times over the last couple of years,” Maarbani says. “It’s a better-for-you drinks business that created — and uses — a patented, naturally sugar-free sweetener formula. There’s nothing artificial. When they came to us about two years ago, we raised $6 million for them at a $20 million valuation.
“They’ve since grown out from Australia and into the UK and European markets, and they are still building more products and tapping into other markets. So they came back to us for another raise at $45 million. On paper, the investors who got in with Nexba and VentureCrowd for that first round have more than doubled their money.”
Younger generations are affecting real change
Maarbani says we are well past the stage where the average investor only looks at traditional assets; a well-diversified portfolio needs more than just stocks and commodities. Instead, there’s been rapid uptake among millennials and Gen Z, many of whom are fed up with the elite making major decisions that will have a negative impact on younger generations in the decades to come. That’s where impact investing via alternatives really hits its stride.
“If we look at who the consumers are, at who the investors are, they are millennials and Gen Z. Those two generations make up 60% of the global population, and they are in the process of inheriting the largest intergenerational transfer of wealth in modern history,” Maarbani says.
So what does that really mean? It means this collective of young people who are unabashedly vocal about enacting real and positive change are not only one of the most powerful investor groups in the world right now, but also one of the most powerful consumer groups.
“The decisions they are making both at a political level and a consumer level — such as purchasing decisions in the grocery store — are having a real effect,” Maarbani says. “And then at an investment level, what those decisions really translate to are, ‘We’ve heard you. We know a lot more now than we did before. We don’t believe you. And we want change.’
“So whether it’s food-tech startups removing artificial ingredients, or other early-stage companies operating in the climate-tech or health-tech spaces, their ideas for changing the world can be incredibly attractive to investors. And investors love these stories because they are the ultimate consumer of their products. They are now more conscious and more informed, and they want to make a difference through impact investing.”
Globally the size of the impact investing market is now nearly USD 1.2 trillion, an increase of 63% since 2019. Maarbani says “While this is an extraordinary jump, we believe this is just the tip of the iceberg. There’s no doubt impact investing will continue to ramp up in 2023, and that is something we think is very positive.”
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