Impact Investing Trends and Climate Change

According to the 2020 Annual Impact Investor Survey, published by the Global Impact Investing Network (GIIN), investors managed over $404 billion in impact investing in the US, a portion of the $715 billion global impact investing market. These figures reflect the growing interest in this investment strategy, which involves placing money into businesses that integrate environmental, social, and governance (ESG) factors into their operations. Another study found that impact investing that incorporated ESG into a portfolio allowed for better performance and less risk.

Putting money into green bonds, food tech, sustainable fashion companies, food waste reduction, sustainable plastic packaging, and sustainable forestry and agriculture initiatives are a few examples of impact investing. These activities are environmentally friendly, and in the case of sustainable forestry and agriculture, reduce impacts on the climate.

The Gates Foundation, a philanthropic organization that supports health improvement, gender equity, and education, is one example of an impact investor. The Soros Foundation, which supports organizations that promote democracy, journalism, and higher education, is another.

Some companies have developed innovative strategies that promote adaptation to the changing environment. For example, India-based Roserve has invested in technology to support sustainable recycled water use across industries. The company has expanded into Africa. A company called Zephyr has chosen to reduce its impact on the environment by developing a wind-power plant on the Pakistan coast. To protect the plant from rising sea levels, the company has invested in a program that protects and repairs mangrove trees, which act as a natural barrier to the ocean. This will attract more fish and other animals, reduce the cost of maintaining infrastructure, and enhance oil stability.

Companies also have tried to mitigate climate change through carbon sequestration — reducing the amount of carbon they put in the atmosphere. The Net Zero Asset Owner Alliance and institutional investors have driven such efforts. The Alliance is a group of 49 investors who have committed to making sure to transition their portfolios to companies with a mission of net-zero greenhouse gas emissions by 2050.

Forestry is an industry that investors have pointed to because it supports the livelihoods of 1.3 billion people globally. Global institutional investment in forestry has increased from $10–15 billion in the early part of the millennium to $100 billion as of March 2021. The idea is that carbon sequestration is a complement to other activities.

The Kenya-based company Komaza is an example of how a business can advance carbon sequestration. Through micro-forestry, the company helps thousands of farmers grow trees in infertile soil. The farmers then sell the timber to commercial companies. In turn, the farmers generate long-term income and sustain the environment. Another method for carbon sequestration is to enhance coastal environments consisting of mangrove trees, marshes and sea grasses.

In 2018, the United Nations’ Intergovernmental Panel on Climate Change reported that greenhouse emissions would have to decline quickly for global warming to be held to no more than 1.5 degrees Celsius above preindustrial levels over the coming decades. Investors have responded to this urgent call to action with impact investing.

APPA has responded to this call to action and created a whole investment strategy around impact investing and measuring our carbon footprint through another Certified B Corp named Aclymate (https://aclymate.com). We strive to be carbon neutral by 2025. If you are interested in impact investing, email invest@apparealestate.com.

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Aaron Marzwell has spent nearly eight years as the chief executive officer of APPA Real Estate in Los Angeles.

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Aaron Marzwell

Aaron Marzwell has spent nearly eight years as the chief executive officer of APPA Real Estate in Los Angeles.