Investment Strategies: Exploring the Three Methods to Enhance Impact Investing Distinctiveness

In the realm of sustainable finance, several significant developments have taken place recently.

Aegon Asset Management (Aegon AM) has entered the climate transition bond market with a new fund, aiming to support projects that contribute to a low-carbon economy.

Meanwhile, in the world of impact investing, two distinct approaches to additionality – a concept used to differentiate impact investing from mainstream finance – have gained prominence.

The Sacrifice approach involves accepting below-market terms or assuming greater risks than mainstream investors would tolerate, with the aim of enabling important impact-driven projects and unlocking commercial capital through "crowding in" effects.

On the other hand, the Savvy approach identifies opportunities that non-impact investors often overlook or misunderstand, thereby providing a unique avenue for impact investment.

Support, as a third approach, requires interventions driving impact beyond what conventional investors would achieve. This can involve influencing investee strategy or operations to enhance impact in ways that conventional investors would not pursue.

For instance, Prime Coalition, an organisation that supports climate startups with long development timelines and elevated risk profiles, embodies the Support approach.

Finnfund, a Finnish development financier, has also announced a €80m first close of a digital access impact fund, demonstrating a commitment to the Savvy approach.

Acre Impact Capital, a firm that aims for both market-rate financial returns and additionality, employs strong relationships and partnerships with key players in the export finance ecosystem to achieve its goals.

SJF Ventures, a firm specialising in impact-oriented value creation projects, pushes its investees beyond the linear relationship between financial growth and social/environmental outcomes, showcasing the Sacrifice approach.

Moreover, organisations like The Barra Foundation, which provides loans to community development initiatives with interest rates often under 3%, and JICA, which invested $40m in Aavishkaar Capital's supply chain fund, are also contributing to the impact investing landscape.

Lastly, it's worth noting that Michael Brown, who is indicated as the head of research at the Impact Investing Research Lab, plays a crucial role in the field. However, the specific organisation that named him as such is not identified in the provided search results.

These developments underscore the growing importance and diversity of impact investing, as investors seek to demonstrate how their capital creates unique value beyond conventional markets.

Investment Strategies: Exploring the Three Methods to Enhance Impact Investing Distinctiveness