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Impact Investing: Zeitgeist of the Modern World By: Muskan Bajpai (National Institute of Bank Management, Pune) Background: As we are moving ahead in the field of technology, finance, and science, the consciousness of the people seems to have been germinating faster. Investing based on the ESG (Environmental, Social and Governance) metrics, in the field of finance is a branch of the bigger tree called Impact Investing. The Impact fund adds to the social benefit fund as well as the financial goals of a company. The intention behind making these investments is to generate positive, measurable, environmental and social impact along with the financial returns. Current Scenario: The post pandemic world is actively demanding solutions to problems that were rising eventually and have now come at our feet. Social innovators who can bring in disruptive innovations and who believe in the long-term vision of impact funding are direly needed. Due to the pandemic, our health and economic machinery were questioned and the pandemic also impacted the disadvantaged population even more severely. But the world became aware. The care towards the question of ‘What is my money going to do?’ increased. The answer was sitting right here all the time - Impact Investing. It would be naïve and irrational to believe that only the government & the philanthropic community will bring the change. It is a collective effort and even the private investors and venture capitalists, family groups etc. shall take a pledge to address the ESG problems around us and invest in what brings a change and increases the sustainable standard of living. India: Still in Nascency Currently, many insurance companies, venture capitalists, pension funds, traditional banks, foundations, and family offices are stepping in this impact investing pond. Globally, a gradual increase can be observed in the number of family offices and High Net Worth (HNI) individuals in the investor segment. The reason why family offices and individuals are growing so rapidly in this field is due to the less stringent regulations bounding them. But when it comes to India, an emerging hub for startups, there is a lot of potential for the HNIs to jump in on the wagon early and encourage long term intergenerational impact. Very few domestic investors are aware of this amalgamation of social benefit with financial return which is why we see almost 80-85% of impact investing in India from overseas. India is on a path to getting over 6 lakh HNIs by 2025, but till now only a few notable HNIs like Kris Gopalakrishnan, Ravi Venkatesan, Anil Rai Gupta, Ronnie Screwvala, Vikram Gandhi etc., are actively investing domestically. Impact investing in India is being spearheaded by firms such as Omidyar Network, Elevar Equity, Unitus Ventures Aavishkaar Group, Acumen and etc. Despite the culture of impact investing being new, the movement is gradually gaining momentum. The aggregate assets in impact investments between 2010 and 2016 in India were US$5.2 billion, of which US$1.1 billion was invested in 2016 alone.
