Impact Investing and the Promise of Real Assets

IMPACT INVESTMENTS — those that seek a specific social or environmental impact alongside financial returns — continue to grow rapidly. Early movers such as niche firms and foundations have blazed the trail, but as investor interest grows, larger investment management firms — including large institutional investors—are building capacity in this area.

However, like cryptocurrencies and AI, impact investments add variables that don’t easily fit with more conservative investment management theories and practices. So, where might investors start in this nascent market?

In a world of low interest rates, high prices for many traditional investments, and the increasing willingness of institutional investors to explore alternatives, could real assets—investments in real estate or infrastructure projects — be a starting place to try out impact investing? The answer is Yes. But first, a little background.

Defining Impact Investing

Whereas traditional responsible investing tended to reduce harm by avoiding certain business practices or products, impact investments strive for positive impacts — such as improving health outcomes or supporting the shift to green energy — that also produce a financial return.

Investments using this relatively new approach are growing fast. In 2017, more than US$114 billion in impact investing assets were under management globally, up from US$77.4 in 2015. suggests the global market will grow to US$1 trillion by 2020, and another estimate proposes more than US$2 trillion by 2025. In Canada, CAD $9.2 billion in 2015 (more than doubling from CAD$4.1 billion in 2014) may jump to