How fintech will bring impact investing into the mainstream
Last year’s Annual Impact Investor Survey (June 2020) from the Global Impact Investing Network (GIIN) showed that just 300 impact investors had collectively funded relevant assets to the tune of $404 billion.
The survey also uncovered a number of key trends that show diversity is still the main driver for impact investing. It also showed that impact investing is growing in maturity and depth and that there is still much opportunity to refine management and measurables.
Impact investing has grown hugely over the past ten years, but more needs to be done to pull it fully into the mainstream. And this is where fintech platforms come in.
Investors are looking for new opportunities to make a difference
Challenges facing impact investors include concerns about greenwashing and accountability. Investors are wary of putting their money into a firm that promises a lot and fails to deliver.
But fintech start-ups appear to be answering these issues with 21st century solutions. They are attracting new investors and clients in totally innovative ways. We can see the significance of the rise of impact investor platforms in the fact that Dealroom registered 14 tech companies in this sphere. Collectively, they’ve raised a total of £49.6 million in funding.
There is a very real opportunity right now for fintechs to head their own impact investment category. By offering easy to use apps dedicated to sustainable investment opportunities, these fintechs can capture clients that are desperate for new ways to use their money for a greater good — and to make decent returns of course.
Addressing greenwashing and accountability
Building trust is key for these platforms to be successful in the long term. Investors looking to enter impact investing are naturally wary about the possibility of greenwashing or where their well-intentioned investments go. This means they will be very keen on accountability and monitoring, and this must be reflecting in transparent reporting by the platform.
Clarity and transparency are vital, and any fintech platform that wants to grow, must act on this. Furthermore, they should be aware that their own credentials will be under scrutiny too.
Key examples of this trend are seen with the likes of Clim8, an impact investor app that launched in March for iOS and Android devices. So far, Clim8 has raised funding of £10 million and is designed to give individuals the opportunity to invest in positive areas, such as the circular economy, clean energy and tech and clean water.
Another is Cooler Future, which has raised funding of £1.2 million from VC firms and angel investors. Its tagline is: Invest sustainably. Earn returns, which is the ideal slogan for the new breed of investors rising through the ranks.
The future of impact investing is via fintech platforms
In addition to developing investing platforms that appeal to those looking for sustainability options, these fintechs are also creating new opportunities for investors new to the scene.
It’s important that keen investors have a clear, accessible entry route into sustainable investment, and that’s exactly what these fintech firms are delivering.
Tickr, for example, is a sustainable investment platform that launched back in 2018. The fintech estimates that 90% of its clients are totally new to investing, suggesting that it’s the sustainability options that are proving a major draw. People do want to make a difference to the future, and they actively look for investment opportunities that reflect this.
Now that impact investing has successfully transitioned into mobile devices, I expect it to flourish over the next few years. People will become increasingly aware of how accessible and trustworthy these apps are, and impact investment will become truly mainstream.
I think that in a few years the phrase impact investing will have been retired, and this kind of active, sustainable investment will become the norm. When this happens, it will be thanks to the successful fusion of fintech start-ups, innovation and accessibility of impact investing opportunities.