Impact Investing 101
Local Investing YYC’s investment strategy is centred on impact.
it’s a core principle of cooperatives and an investment approach that has been around for many decades. In this blog post, we look to answer some questions on what impact investing is and why it matters.
Can your investments do more than just grow financial returns?
The simple answer is –yes! It’s a strategy that blends financial returns with positive social and environmental business performance. Impact investing is not just about profit; it’s about purpose. Increasingly, businesses are stepping up to tackle the planet’s greatest sustainability challenges, as defined by the 17 UN Sustainable Development Goals (often referred to as the world’s sustainability strategy). Through impact investing, capital is directed towards ‘social enterprises’ that can help create local jobs, support underrepresented demographics in the workforce, scale low-carbon technologies, and improve the availability of environmentally conscious consumer products - all solutions to our global environmental or societal challenges.
So, how does it work?
Impact investors are driven by a clear mission to create social or environmental benefits. This value-driven approach informs the investment criteria when selecting companies to invest in. However, unlike philanthropy, impact investing also seeks financial gains often comparable to traditional investments. In addition to financial results, investors also consider the investment’s ability to create impact such as reducing emissions or waste, attaining sustainable practices recognized through certifications like B Corp, or job creation for diverse demographics, such as veterans, minorities, women or people with disabilities. Finally, impact measurement and transparency are key. Investors measure and report the outcomes to understand how their investment is making a difference.
How big is the impact investing market is in Canada?
As of 2023, the impact investing market in Canada boasts an impressive CAD 14 billion in assets under management. That’s a staggering 56% growth since 2015 when it was just CAD 9 billion [1]. And it’s not slowing down. Impact investment is surging as younger investors prioritize ethical choices and purpose-driven organizations address global issues. Impact investments are projected to grow by 10% annually, with both new and existing investors potentially injecting an additional CAD 1.5 billion into the market each year [2].
How does Local Investing YYC fit in?
Local Investing YYC is a member-owned cooperative that invests in Calgary-based businesses that generate financial, social and environmental returns. Our strategy and due diligence process aligns with impact investing principles. We choose our investments with the prosperity and sustainability of our local economy in mind. Since 2019, we have raised $2.32 million in capital and invested in 10 local businesses.
Our investment strategy focuses on financial performance and community impact. Through our due diligence process, we evaluate financial factors and business plan execution alongside the degree of environmental and/or social impact generated through the company’s business model, products or services. We use the UN SDGs as one of the ways to assess how the businesses are addressing key challenges and contributing positively in our local community. Once invested, our investee business report out on impact throughout the year, including on a range of environment and social metrics which are then shared publicly, and with our investor members in our annual Impact Report.
Who are the other players in Canada’s impact community?
Impact investors are only one part of the ecosystem of social finance. Mobilizing capital and building the pipeline of impact-oriented businesses depends on many key players.
The Social Finance Fund is a Government of Canada $755 million initiative that supports the development of existing and emerging social finance intermediaries and provides affordable and flexible financing. Social finance intermediaries include investors like Boann Social Impact, who is a key partner and investor in LIYYC’s latest investment portfolio.
Impact investing advocacy groups like the Table of Impact Investment Practitioners and the Canadian CED Network offer support to social purpose organizations, connecting impact investors with community-rooted solutions and collaborate on education, awareness and policy.
Technology accelerators, like Platform Calgary and early-stage investment funds like UCeed, Propel Impact, and Spring Impact Capital help to accelerate early-stage startup companies. By offering support during critical transitional stages, supporting skill development and helping to attract investment, these organizations are critical to the success of scaling many of the companies we invest in.
Other co-operatives, like the Cooperators and connectFirst Credit Union share in our vision in prioritizing member-driven, community focused investment in the local economy. We are often at the table together on public policy, guided by the seven shared principles and values of co-operatives like cooperation and concern for community.
[1] https://rallyassets.com/wp-content/uploads/2024/05/CWIIG_report.pdf2https://thegiin.org/publication/research/state-of-the-market-2024-trends-performance-and-allocations/
[2] https://thegiin.org/publication/research/state-of-the-market-2024-trends-performance-and-allocations/
