TORONTO — For average investors entering the responsible investing space, many of the options most focused on making a measurable impact are out of reach.
One fund management company is trying to change that with plans for a publicly traded fund geared toward "impact investments," a subset of responsible investing that has more specific and measurable criteria.
“The idea of doing a public listing for this was in a sense that idea of democratizing impact investing, making it more accessible to a wider base of investors,” said James Tansey, chief executive of Kizmet Impact Capital.
Impact investments focus on companies and initiatives that make social and environmental impacts a core part of their business, while still providing a financial return.
The category goes beyond the popular environmental, social and governance investments that screen companies on their performance and focuses more on investments meant to create a measurable positive outcome.
It’s also a much smaller space than the broader world of ESG-- environmental, social and governance-focused investing, which has grown in popularity over the past decade as investors seek out companies and projects that offer more than a financial return on investment. The Global Impact Investing Network estimates the worldwide impact market to be worth about $915 million, while investments in Canada that factor in ESG issues are estimated to top$3.2 trillion, according to the Responsible Investment Association.
Impact investing emerged as a concept from the philanthropic space in 2007 or so, though the idea goes back decades, and the actual financial capital still comes mainly from foundations, institutions and government in private transactions. Retail investors who want in on the action haven't had much chance up to now.
There are increasing options for accredited investors, including funds offered by Vancouver-based Deetken Impact, but they require at least a $250,000 investment (several others start off at a million dollars). Other organizations such as Toronto-based Rally Impact and Kitchener, Ont.-based Sarona Asset Management are also active in the accredited investor space.
Kizmet hopes to attract retail investors and institutional investors limited to public markets when it launches on the Neo Exchange, expected in April or May. The fund plans to close a $2.5-millon financing by the end of February, then plans to raise $30 millionconcurrent with the stock exchange launch.
Tansey said the fund will focus on Canada and U.S.-based companies in impact-focused areas of food, health and technology.
“Some of our companies include groups that are looking at digital apps for diabetes prevention and reversal, or a vegan fast food chain. So it's sort of fundamentally different products than you'll see in most public equities.”
Kizmetsays it's among the first to offer public market access to impact investments, though a lotdepends on how the term is defined. What constitutes an impact investment, and how the impacts are measured, are still evolving as numerous groups work to create standards and definitions.
Tansey said the Kizmet will focus on UN sustainable development goals and adhere to the IRIS+ framework created by the Global Impact Investing Network.
While still improving, the systems have already come a long way, said Lindsay Wallace, a director of the Canada Forum for Impact Investment and Development.
“It's always going to continue to improve, and there will be changes and so on, but I think we're certainly much further ahead than a few years ago.”
Canada is moving along in several fronts on impact investing, including partnerships between CAFIID and the Table of Impact Investment Practitioners bring more attention to the sector, while the Federal government recently launched the $755-million Social Finance Fund. Companies are also getting involved in the space including Telus launching a $100-million fund in 2020.
What’s clear, said Wallace, is that there’s growing interest and momentum.
“Particularly maybe with the younger generations, people are becoming much more aware of where their money is actually going, with some of the impact that it's having," she said.
"There's a greater recognition of how interconnected we all are. Certainly the pandemic has helped to reinforce that.”
This report by The Canadian Press was first published Feb. 13, 2022.
Ian Bickis, The Canadian Press
