Balancing Financial Returns with Social and Environmental Benefits
The journey of impact investing is much like a fishing expedition. Just as a successful caster needs a well-crafted plan to reel in the desired catch, an astute impact investor must navigate the vast ocean of possibilities to unlock true impact.
What to expect in this article.
In this article, we’ll explore how impactful investments have created ripples of change. We’ll uncover the stories behind the catch of the day—those untapped opportunities that hold the potential to uplift entire communities and transform lives. And, most importantly, we’ll illuminate the path to making effective investment decisions -championing that financial returns can in fact coexist with positive social and environmental change.
Let’s dive in!
The 5 dimensions of impact.
When evaluating an organisation or project for potential investment, assessing credibility and effectiveness is paramount. What issues do you want to address? What outcomes do you want to achieve? The Five Dimensions (questions asked below) of Impact are a framework (a technique) developed by the Impact Management Project (IMP) to help organisations measure, manage, and communicate their impact.
To guide your decision-making process, apply IMP’s 5 dimensions. And, to unpack this further for you, we applied them to Infra Impact, using Eagle Towers – one of our proud moments of unlocking true impact.
Who benefits? Identify the stakeholders who stand to gain from the initiative. This knowledge is crucial for strategic planning and resource allocation, as it determines the extent and impact of the project.
For example, Infra Impact helped its portfolio company get the senior secured loan facility provided by Prescient Investment Management’s Prescient Infrastructure Debt Fund. The primary beneficiaries were people living in remote areas who required mobile connectivity to access information, communication, and services.
How significant is the impact? Gauge the scale, depth, and duration of the intended impact. Quantify the number of people affected and the degree of change they will experience this impact.
For example, our client, Eagle Towers secured an R100 million (US$5,5 million) loan to support the telecommunications towers company’s expansion plans.
What is the contribution? Evaluate how the organisation’s efforts contribute to the observed impact. Assess the difference they make compared to a scenario where no action was taken.
For example, Eagle Towers has been constructing, operating, and maintaining telecommunications towers across South Africa, especially in rural areas. If Infra Impact had not secured the loan, Eagle Towers wouldn’t have participated in Vodacom’s Deep Rural Programme RFP. Due to the partnership, they won it – which means they can continue doing good work. “We are delighted to have played a significant role in supporting Eagle Towers as they look to expand and grow their business,” said Morné Edas, founder and Co-Managing Partner of Infra Impact.
What are the risks? Identify uncertainties that could impede the project’s success. By assessing this, you prepare strategies to mitigate risks and ensure a smooth path toward achieving the desired impact.
For example, investing money in something that seems promising but ultimately does not deliver results can be risky. Due to our exclusive investment in mid-market infrastructure companies that have already proven their worth, Infra Impact mitigates some type of risk immediately. It is important to stay alert to potential risks such as government regulations changing, natural disasters, and community resistance to land access. Achieving true impact requires understanding these strategies appropriately.
With us, not only are these dimensions applied in finding true potential, but what really sets us apart is our unwavering belief in organisations, so much so that we are willing to partner with them again at a later stage. This trust, support, and dedication go a long way in truly understanding the steps required to achieve true impact.
Time to reel it in.
By addressing these dimensions—beneficiaries, impact assessment, contribution, and risk—you gain a comprehensive understanding of the organisation or project’s credibility and effectiveness. And, armed with this knowledge, you can make informed investment decisions that drive positive change in society, and profits.
