Does your building have Impact?
There is a new trend in investment markets called ‘Impact Investing’. Impact investing requires a positive social and ecological return alongside a financial return. The question for property is – what impact will Impact Investing have on your assets? And how will you respond?
The first of two posts explores the recent trend of Impact Investing and the second will answer the question of what impact it will have.
A great article from Forbes sums it up nicely “Making Money While Making The World A Better Place”.
The article starts with definition for Impact Investment is from Global Impact Investment Network (GIIN) – Impact investments “are investments made into companies, organizations, and funds with the intention to generate a measurable, beneficial social and environmental impact alongside a financial return.”
The reason I and others in my field love the definition is that it flips the thinking of the environment on it’s head. We have been doing what we do for the last 20 years focused on ‘reducing environmental impact’, the impact investment focus flips it to ‘creating beneficial environmental impact’. It completely changes the way that teams, clients and users respond to approach a design problem. Lets create a positive impact means you are improving on the current situation, where as lets reduce our environmental impact means you are undoing a wrong.
Back to impact investing.
“Impact investing is emerging as a growing sector and a dynamic multifaceted new economy. It is considered by many to be the most promising social innovation gaining significant momentum. In Sorenson’s presentation he shared several megatrends that are driving impact investing:
1. There is massive pent up demand for goods and services from the 4 billion people with annual incomes below $3,000, estimated at $5 trillion. (source: CNN money)
2. There has been tremendous investor movement in sustainably responsible investments, which are projected to grow to $3 trillion to $10 trillion annually by 2050. (source: WBCSD)
3. The welfare state will be forced to be reconfigured as some government expenditures dramatically increase current sources of revenue. For example, life expectancy increases coupled with increased health care costs are projected to nearly double as a percent of GDP by 2040 in most developed countries.
4. Over the next 40 years Generation X and the Millennial Generation will potentially inherit an estimated $41 trillion from the Baby Boomer Generation. Surveys show that a key objective of this generation is for business to play a major role in improving society.”
What will the market value of impact investing be?
“The potential for impact investing is enormous. A 2009 report by Monitor Institute placed the potential for impact investing to grow from $50 billion to $500 billion by 2020. More recently in 2012, the Calvert Foundation estimated an impact investing market potential of $650 billion dollars.”
OK, all well and good but what does this mean to property and the built environment?
Well, a lot of our superannuation and personal investments are plowed into property every year. Almost every company in the world works in a building of some description. We all live in buildings. We all use building of some description every day of our lives.
Buildings and property will be impacted by Impact Investment.
The next post will discuss the how impact investment will impact property and how you can prepare yourself for it.